Coal India (CIL) has overtaken Reliance Industries (RIL) as the country’s most valuable company by market capitalisation.
At Wednesday’s closing price, Coal India’s market capitalisation stood at Rs2.51 lakh crore ($55 billion), while that of Reliance was at Rs2.47 lakh crore ($54 billion).
Last week, Apple had briefly taken over as the most valuable company by market capitalisation in the world. Apple and Exxon Mobil have a market capitalisation of around $341 billion each, with Exxon Mobil’s being marginally higher.
Still, Apple overtaking Exxon as the most valuable company by market capitalisation is definitely something to cheer about, but Coal India overtaking Reliance isn’t.
And why? It’s because Apple symbolises innovation, while Coal India symbolises the vast piles of coal reserves it is sitting on.
Ten years back, Apple was 287th down the market capitalisation pecking order. Today, it is number one or two, depending on market fluctuation. Apple has come up the ranks due to its innovative products that have taken the world by storm.
Its iPod, iPad, iPhone and Mac are household items across the globe and sales in China, the fastest growth market in the world, are just the tip of the iceberg.
Coal India, on the other hand, is a government-owned company. It is sitting on the largest reserves of coal in the world and sells coal at a 57% discount to global prices. The government owns 90% of the company. Coal India dominates the coal industry in India with an 82% market share.
The company value arises from the reserves it is sitting on and the coal supply demand dynamics, which is skewed towards demand rather than supply. Any price increase in coal goes directly to Coal India’s bottomline.
The difference between Apple and Coal India couldn’t be starker.
Apple is a dynamic company engaged in the most competitive business in the world. It has to innovate to survive and do well, which it has done admirably.
Coal India, on the other hand, does not have to do anything, its value comes from underneath. It has no competition, no accountability, no pressures and answers only to the government, which symbolises all the ills of poor management.
Apple overtook Exxon on market capitalisation because it has done something right, while Coal India overtook Reliance in market capitalisation without having to do anything. That should be a wake-up call to Indians —- on our lack of ability to innovate and become world-class players in the highly competitive fields of electronics and technology.
The sharp fall in the share prices of outsourcers such as Infosys and Wipro, which have fallen by over 25% on worries over US economic growth only highlights the dependence on low-value technology services as opposed to high-value innovative technology products.
Coal India rising to the top is thus a sad event. Hopefully, India has an Apple clone on its way somewhere.
