3 ‘Only Loss-Making’ Large Caps on NSE!

When we think of large caps we generally have a perception of large businesses that are quite stable with robust financials. These companies have great management and generally have stable cashflows and therefore long-term or low-risk investors tend to prefer them over smaller businesses.

However, it is not a hard-and-fast rule and many large caps could lose steam for a few years and run into losses. Therefore, blindly buying blue chips is probably not a good idea. In that vein, I have listed three large caps that reported a loss-making FY22, and surprisingly these are the only 3 companies out of 100 large caps on the NSE, with the remaining 97 being profitable in FY22.

Tata Motors Limited

Tata Motors Ltd (NS:) which is one of the largest passenger and commercial vehicles manufacturer in India seems to be a perpetual loss-making company. It has a market capitalization of INR 1,48,206 crores and has been reeling under losses for the last 4 years. Although losses are consecutively reducing, from INR 28,826.23 crores in FY19 to INR 11,441.47 crores in FY22, but still it’s struggling to become net profitable.

As the EV story for the company seems promising because it’s heavily focused on electric vehicles which are also seeing increasing demand, the rate of loss reduction might pick up pace in the coming quarters. On the valuation front, it is trading at a negative P/E of 12.95 which is the lowest amongst all companies.

Interglobe Aviation Limited

Interglobe Aviation Ltd (NS:) is an airline with a market capitalization of INR 65,924 crores. The company hasn’t been able to recover from the Covid-19 pandemic hit and is continuously increasing its losses. In FY19, the company reported a profit of INR 157.25 crores, and for the next three years, it only reported increasing losses, from INR 233.68 in FY20 to a massive loss of INR 5,806.43 crores in FY21 to a further loss of INR 6,161.83 crores in FY22.

Increased fuel prices have also played a part in narrowing profit margins but that shouldn’t be a major excuse as airline companies also hedge against rising fuel costs which can significantly protect the operational cost from increasing, if done correctly.

Zomato Limited

Well, the first thing you would say is that Zomato Ltd (NS:) is not a large-cap company. There is confusion amongst many regarding the categorization. Well, according to SEBI, the categorization is not done market cap-wise, but rank-wise. The top 100 companies on the NSE are termed large caps, irrespective of their market capitalization. Mid-caps are from the top 101 to 250. 

Zomato, with a market capitalization of INR 53,312 crores makes it the 93rd largest company on the NSE, essentially making it a large-cap. Now coming to the business, there is no question that the company is a cash-burning machine. According to the data since FY14, the company has ‘never’ reported a profitable year! In fact, the loss for FY22 was 48% higher than FY21, at INR 1,208.7 crores.   

I am not saying any of these businesses are bad, but blindly investing in a company just because it comes under a category of a large-cap shouldn’t be a way to invest rationally.