Return on Capital Employed (ROCE) is a ratio used to analyse a company’s profitability and capital efficiency. It helps investors and other stakeholders to know how well a company is generating profits from its capital as it is put to use.
It indicates what percentage of the total capital is the EBIT (Earnings before interest and tax) of a company. Here are a few large-cap companies whose shares trade below ₹ 1000 apiece and have given a return on capital employed of more than 20%:
ITC Ltd.
The diversified company’s shares were trading at ₹ 339.30 apiece on Monday and have a market capitalization of ₹ 420,704 crores. The company has a return on capital employed of 31.89%. The shares recently climbed to their five-year high of ₹ 349.55 despite a weak market on Friday.
Experts believe that its shares might scale new heights given the potential for price hikes in cigarettes preempting the next Union budget, strong underlying performance with improved profitability in the foods portfolio, improving outlook and potential demerger for the Hotel business, and bridging the valuation gap.
HCL Technologies Ltd.
The IT Major has a market capitalization of ₹ 245,193 crores and its shares were trading at ₹ 903.55 apiece at 11:45 AM on Monday. It has a return on capital employed of 24.58%.
HCL Technologies has lost 32.18% as per year-to-date data. The Russia-Ukraine war, economic slowdown, highly volatile global markets and bleak earnings outlook led to a decline in the share price of most IT shares.
Tata Steel Ltd.
The steel behemoth’s shares were trading at ₹ 99.15 apiece on Monday. It is a large-cap, with a market capitalization of ₹ 121,158 crores. The company has a return on capital employed of 28.31%.
The steel major’s board has approved the amalgamation of all seven metal companies of the Tata group into Tata Steel Limited. These companies are Tata Steel Long Products Limited, The Tinplate Company of India Limited, Tata Metaliks Limited, TRF Limited, The Indian Steel & Wire Products Limited, Tata Steel Mining Limited and S & T Mining Company Limited.
Hindustan Zinc Ltd.
The company’s shares were trading at ₹ 270.95 apiece and it has a market capitalization of ₹ 114,506 crores. It has a return on capital employed of 37.65 %.
The government is likely to sell its residual 29.54% stake in Hindustan Zinc, a Vedanta group-controlled company in tranches. Further, the company executed a long-term renewable power delivery agreement (PDA) up to a capacity of 200 MW with SPV, namely Serentica Renewables India 4 Private Limited on September 2.
Written by Simran Bafna
Disclaimer
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