Proof(s) of How Small is India’s Largest Company – Last One is a Big Surprise!!

A few days back, I was going through list of index constituents, when something caught my eye:

Currently, India’s largest company by market capitalization is TCS. It has a market cap of Rs 5.4 Lac Crores; which is equivalent to about 85 Billion Dollars. Now this in itself seems like a very big number. But compare this with $230 Billion market cap which Alibaba achieved on the very first day after its successful IPO….and you will feel that TCS’s $85 Billion may not be a very big number after all.

Though 100 Billion dollars like the next target for Indian companies, and it might happened quite soon…I personally feel that we are still atleast a decade or two away from having companies which can rub shoulders with Apple(s) & Google(s) in market capitalization.

Note – Apple has market cap of $600 Billion. Google’s is $392 Billion.

This big difference in market caps between Indian and US giants pushed me on a path to analyze market caps of global giants.

And rest of the post is about that and full of some really big and eye-popping numbers.

Last month, Alibaba listed at a valuation of $235 billion with the biggest IPO ever by a company listing in US. But this was still a long way from Apple’s current market cap of $600 Billion. And mentioning the market cap of TCS of 85 Billion seems like a criminal act. 🙂

World's Biggest market Cap Companies
In 2012, Apple broke Microsoft’s long standing record for US markets by breaching $616 billion mark which was set way back in 1999 at the peak of the dot-com boom.  But if we adjust these numbers for inflation, we would see that Apple is still hasn’t done what Microsoft or few other companies managed to do in 2000s. Apple is not even the second- or third-largest company by market cap in American history; it comes in fifth on this list as seen in graph below:

Now if you think that Apple, which eventually touched $665 billion, was the biggest company ever, then you are mistaken.

A relatively unknown name in India, but an energy behemoth achieved the distinction of becoming the first-ever company to be valued at $1 trillion.

Yes… One Trillion Dollars…. i.e ….1000 Billion Dollars!!

China’s biggest energy producer PetroChina achieved this mark in 2007 when its shares tripled on the very first day of trading after its IPO on the Shanghai exchange.

Now one of the companies which have intrigued me for long is Standard Oil. Having worked for few years in Oil Refining sector has also played a part in me having a soft corner for energy companies. 🙂

Founder of Standard Oil was John D. Rockefeller. He was the richest man ever, worth almost $700 Billion in today’s terms – compare this with Apple’s market capitalization of $600 Billion and you would understand about the enormousness of Rockefeller’s achievement.

Note – You might be interested in reading an article I did for Old School Value about the Secrets to Rockefeller’s Massive Wealth.
Share Certificate of Standard Oil
Now let’s see where Standard Oil would have stood in this game of market capitalization. At its peak, Standard Oil controlled 90 percent of American refining capacity. The company no longer exists and was split into 34 smaller companies in 1911 after an anti-trust legislation.

Among the “baby Standards” that still exist are ExxonMobil (Current Market Cap – $400 Billion) and Chevron ($200 Billion). You can now get a feel of how big the ‘mother’ of these babies was. According to some estimates, Standard Oil could have possibly been worth more than $1 trillion today. And this is pretty close to PetroChina’s inflation adjusted all-time highs:

So…

Are we done? Is Standard Oil the biggest company ever? Or is it PetroChina?

No..Probably not…

There is an unlisted state-controlled company named Saudi Aramco which owns the largest proven reserves of crude oil. And recent efforts to estimate the size of this oil-giant ranges from (hold your breath) $2.2 trillion to over $7 trillion!! (source)

A more reliable reference point would be $3.6 trillion as calculated by University of Texas. And that is quite conservative since company’s crude oil reserves are worth more than $25 trillion.

Note – You can read more about Saudi Aramco here.

So…

Is Saudi Aramco the biggest company ever?

No again… 🙂

There is another company which like Standard Oil, does not exist today.

Any guesses?

Here is a hint….

It was the first company to go public and that too on world’s first stock exchange!

Still don’t know? No worries…. the answer is…

The Dutch East India Company

The company raised capital in the year 1602 and at its peak employed more than 70,000 people around the world. It reached a peak market capitalization of almost 78 million Dutch Guilders at the height of a Tulipmania.

This translates to a modern-day valuation of almost $7.4 Trillion, making the Dutch East India Company the largest company in history.

Just for sake of comparison, I have added TCS’s market cap figures in graph below and as evident, it’s nowhere 🙁

Note – You might be interested in reading more about Tulip Mania in an article I wrote for Safal Niveshak titled What A Tulip Can Tell You About Stock Markets.

I know comparing companies that existed centuries apart does not make any practical sense. But it does show that there have been companies in past which were so powerful and rich (when compared to that era’s world), that today’s companies can’t even dream of achieving that status or power.

Now this post started with a reference to TCS’s market cap. And as it has been observed, it’s pretty clear that as of now, Indian companies are nowhere in the game of market caps. But that is not because we are not capable of it. But because we as a country are still in nascent stages of our development and growth. We are neither a developed nation, nor an economic superpower.

But having said that, one should also look at brighter side of things…that there is such a big scope for Indian companies to grow. And for investors, a chance to make hell lot of money with companies which will eventually grow to levels achieved by big foreign giants.

Note – Quite a few numbers/figures have been sourced from here.
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Best Nifty Stocks and 3 questions that let us shortlist them

Taking cues from Morgan Stanley’s ‘Connecting the Dots’ (June 2012), we decided to shortlist our own set of dependable stocks. For this we used following filters –


Filter 1: Is the Sales growth faster than nominal GDP growth?
This can be achieved by either being a part of a fast growing industry and/or gaining market share within the industry.

Filter 2: Is Profit growth faster than Sales growth?
This signifies a combination of several dimensions like market dominance, pricing power, better cost management, judicious investments and right mix of debt and equity.

Filter 3: Is Earnings per Share (EPS) growth broadly in line with Profit growth?
This signifies that growth and capital efficiency are linked. This also indicates whether an individual shareholder participates proportionately in company’s growth or not.

After shortlisting stocks by using the 3 filters, we added information about Return on Equity (RoE), Debt/Equity (D/E) & Dividend Yield (DY) as these are information which should be looked into before taking a final call to buy any stock.

We started with a universe of 50 safe large cap stocks which form the Nifty50. After putting Filter 1, we were left with 35 stocks. On putting Filter 2, we were left with 19 stocks. Final filter resulted in shortlisting of 13 stocks, which met all three criterias.

During last 3 years, average sales growth of these 13 stocks was 22.10%, which was much above the nominal GDP growth rate of 13 percent. Average Profit growth for these stocks was 31.40% & EPS grew at an astounding CAGR of 33.40%.

So, without much delay, we present the 13 rock solid and dependable stocks of Indian markets…
  • TCS
  • ITC
  • HDFC Bank
  • Wipro
  • BHEL
  • Power Grid
  • Bajaj Auto
  • Kotak Mahindra Bank
  • Axis Bank
  • Hero Motocorp
  • Asian Paints
  • Bank of Baroda
  • IDFC

How these 13 stocks fared on 3 criterias is detailed in table below –

During the last 3 years, an investment made in portfolio of these 13 stocks would have given a market beating return of 17.90% (CAGR)

Only one stock, BHEL, gave negative returns (-17.34%) in this period. Overall market returned a meager 3.73%. This portfolio outperformed the market by 14% + (!!).


A snapshot & analysis of all 50 stocks can be found below. Please click the image to enlarge.

Click to enlarge
Caution – This is not a recommendationto BUY any of these stocks. We have not considered valuations of these stocks in the post. So do your due diligence before buying any of these stocks. Also, past performance is no guarantee of future results.

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