- Reliance Industries (RIL) lost the title of India’s highest profitable company to Tata Consultancy Services (TCS) and the culprit is the Covid-19 pandemic.
In the March 2020 row, Reliance Industries (RIL) lost the title of India’s highest profitable company to Tata Consultancy Services (TCS) and the culprit is the Covid-19 pandemic.
TCS estimated profit after tax (PAT) at Rs 8,049 crore during the period January-March 2020 was ahead of RIL’s estimated PAT of Rs 6,348 crore in the same period. Owing to inventory losses due to a sharp fall in crude oil prices, RIL posted a strong 39 percent year-on-year decline in net profit during the period. In contrast, during Q4FY20, TCS’ net profit dropped by around one percent year-on-year.
RIL has been the most profitable private-sector enterprise for almost two decades now. However, in other financial metrics such as overall sales, operating income, net worth, assets, and market capitalization (m-cap), the Mukesh Ambani-controlled conglomerate remains miles ahead of TCS.
This is the second time RIL has been beaten every quarter by the Tata group business in the net profit league table. TCS net profit had been slightly ahead of RIL’s in the quarter of December 2014.
During the quarter, RIL booked a stock loss of Rs 4,245 crore net of taxes due to a sharp drop in oil prices followed by unprecedented demand destruction due to Covid-19.
RIL remains the most profitable company in the country on an annual basis, with a net profit of Rs 39,354 in FY20 compared to TCS’ Rs 32,340 crore.
This is also the first time in 30 quarters that RIL has posted a 12-month trailing YoY decline in net income, which also indicates a decline in earnings per share for the group.
Such corporations’ shifting fortune reflects in their m-cap, too. For almost a decade now, there has been a cat and mouse game between the two most profitable companies in the country in terms of m-cap. Owing to stronger sales and profit growth it posted in the post-Lehman era, RIL at the top of them-cap for nearly a decade until 2012 when TCS overtook it.
TCS was at the top for around five years at the beginning of 2012, but RIL passed the big technology in early 2018 as investors cheered on the success of their telecom venture – Reliance Jio.
In the last quarter of 2018, TCS again overtook RIL in the m-cap league table only to lose as investors bid up the share prices of RIL in expectation of oil and gas stake sales to Aramco and a reduction in its debt.
RIL is priced at current market prices at Rs 9.3 trillion against the 7.6 trillion Rs m-cap of TCS.
