How we arrived at the BT 500

     Print Edition: November 30 2008

This is the 16th edition of the BT 500 list and with each year there has been value addition to the list in terms of data and various other parameters used to judge the value of a company. This year, we have considered the first seven months between April and October 2008 for calculating the market capitalisation instead of the six-month period to September, as has been the practice in the past. The reason for extending the period by a month this time around has been the sharp fall in stock prices in October.

The ranking is based on the average market capitalistion for the seven months ended October 2008 and the 2007 ranking is also based on same period. The ranking of companies of last year’s edition will not be same as mentioned in this edition for last year. In this year’s study, we have also included return on net worth (RONW)— instead of return on total assets (ROTA)— and Earning Per Share (EPS) to give a better understanding of a company’s performance. We have also provided the second quarter results for the current year along with the financial data on each company.

How we did it
To arrive at the list of India’s most valuable companies, BT relied on the Center for Monitoring Indian Economy’s (CMIE’s) Corporate Database Prowess. Initially, 4,925 companies listed on BSE were included in the list. From this, public sector banks and companies were excluded as there is a separate list (page 118) for the state-run companies. Following this, 4,831 companies were considered. From this list, companies whose shares were traded between April 1 and October 31, 2008 were included; 3,100 companies made the cut. After that only those companies were included in the top 1,000 list that were traded for at least 20 per cent of the number of trading days (145 days) for the period under study. KGN Industries, whose stock price surged to record price of Rs 55,000, was excluded based on this criterion; Centurion Bank of Punjab was included despite it being delisted in June following the merger with HDFC Bank. After identifying the list of companies, they were ranked based on their average market capitalisation for the April-October 2008 period.

Financial parameters
Other than market capitalisation, we have also looked at sales, net profit, return on net worth, return on capital employed, earning per share and net profit margin (net profit as per cent of sales). For all the companies, the financial year ended March 2008 has been considered; standalone numbers included, except for Cairn India as standalone numbers had negligible operating revenues. Where there are exceptions, a footnote is mentioned.

Definitions:
Sales: Operating income and other income.
Net profit: Profit after tax. Market capitalisation: Stock price multiplied by the number of outstanding shares.
Roce: Profit before interest and tax as a percentage of capital employed (fixed assets + circulating capital-current liabilities).
Ronw: Net profit divided by net worth (total assets-total liabilities). Earning per share: Net profit divided by number of

The arithmetic

.
Took 1st April-31st October 2008 as reference period instead of standard practice of April-Sept to get the impact of fall in stock prices in October.

. Started with 4,925 companies listed on BSE. Separated public sector companies, banks and FIs from the list.

. Out of the 4,831 companies, only 3,100 companies traded for 20 per cent of the 145 trading days on BSE during the seven months between April-October.

. Average market capitalisation of each company for the reference period was used instead of any specific day.

. Ranked the top 500 most valuable companies on the basis of average market capitalisation.

. Companies were also ranked based on the sales, net profit and assets.

 

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