In today’s unpredictable market landscape, many investors are jumping at short-term opportunities, often overlooking the value of patience. Renowned investor Charlie Munger wisely remarked, “The big money is not in the buying and selling, but in the waiting.” This principle may explain why certain government-backed companies are garnering attention amid the turbulence caused by recent tariffs.
Discovering Value in Government-Run Firms
Two prominent Indian state-owned enterprises are currently trading at significant discounts, echoing Benjamin Graham’s concept of “margin of safety.” This concept highlights the protective buffer between the investment price and the underlying value, presenting a chance for substantial growth. Are these companies hidden treasures poised for a rebound, or do they reflect unwavering confidence in their long-term competitive advantages?
Coal India Ltd (CIL): A Coal Giant
First on our list is Coal India Ltd, the world’s largest coal producer and a major employer in the corporate sector. Established in 1973 as the Coal Mines Authority following the nationalization of the coal industry, Coal India operates under the auspices of the Ministry of Coal, Government of India, with its headquarters in Kolkata.
- Market Capitalization: Rs 2,32,522 crore
- Coal Contribution: Approximately 80% of India’s total coal output
- Return on Capital Employed (ROCE): An impressive 64%
Coal India has consistently shown its prowess in cash efficiency. The company’s sales surged from Rs 99,586 crore in FY19 to Rs 142,324 crore in FY24, marking a compounded annual growth rate of 7% over five years.
Anticipated results for the last quarter of FY25 are expected soon, but the figures from the first nine months of FY25 already show sales of Rs 1,02,918 crore.
- EBITDA Growth: Increased from Rs 25,007 crore in FY19 to Rs 47,971 crore in FY24, reflecting a 14% compound growth.
- Net Profit: Grew from Rs 17,464 crore in FY19 to Rs 37,369 crore in FY24, achieving a compounded growth of 16%.
Despite recent market fluctuations, the share price of Coal India has risen from around Rs 140 in April 2020 to Rs 378 as of April 7, 2025, representing a remarkable 170% increase. Currently, it trades at a 30% discount from its peak price of Rs 545.
Notably, Coal India offers a dividend yield of 6.75%, providing tangible cash returns to shareholders. The company has declared 29 dividends since February 2011, with the most recent payout being Rs 26.35 per share. Moreover, Coal India is exploring a joint venture in lithium mining with Argentina’s YPF, highlighting its strategic growth initiatives.
Indian Railway Catering & Tourism Corporation Ltd (IRCTC)
Next, we have IRCTC, established in 1999 and publicly listed in 2019. This company holds a monopoly over catering and online ticket booking for the Indian Railways, serving over 23 million passengers daily.
- Market Capitalization: Rs 55,804 crore
- Segments: Internet Ticketing, Catering, Packaged Drinking Water, and Travel & Tourism
IRCTC’s sales have soared from Rs 1,870 crore in FY19 to Rs 4,270 crore in FY24, achieving a compound annual growth rate of 18%.
- EBITDA Growth: From Rs 383 crore in FY19 to Rs 1,466 crore in FY24, marking a 31% increase.
- Net Profit: Expanded from Rs 309 crore in FY19 to Rs 1,111 crore in FY24, representing a compounded growth of 32%.
The share price of IRCTC has seen a substantial rise from Rs 250 in April 2020 to Rs 697 as of April 7, 2025, indicating a 179% increase. However, it’s currently trading at approximately 45% less than its all-time high of Rs 1,279.
IRCTC boasts a debt-free balance sheet and significant cash reserves, ensuring that it can navigate economic challenges while enhancing shareholder value. The company also maintains a 1% dividend yield and a robust payout ratio of 44%.
Evaluating Investment Potential
Both Coal India and IRCTC present compelling cases for investors exploring the concept of "price versus value." Despite being priced lower than their historical highs, their operational strength remains intact, revealing an opportunity for savvy investors.
Coal India excels in consistent cash generation and rewarding shareholders through dividends, while IRCTC showcases an impressive return on capital. The key question for investors is whether these government-owned enterprises can maintain their competitive edge in a rapidly evolving market.
Adding these stocks to your watchlist might be a prudent move, given their robust financial performances and potential for growth.
Conclusion
In a climate where short-term gains dominate the conversation, patience and strategic investment in these government-run firms could yield substantial long-term benefits.
Note: This article serves as an informative overview and not as financial advice. Investors are encouraged to consult with financial professionals before making investment decisions.
