Shares of private sector lender HDFC Bank Ltd on Friday beat India’s energy giant, Reliance Industries Ltd (RIL), for the first time to become the second-most valuable firm in the country.

Tata Consultancy Services Ltd is India’s most valuable company with a market capitalisation of Rs4.14 trillion, stock exchange data shows. HDFC Bank’s market value was at Rs3,25,210.41 crore while its shares closed at Rs1,275.70 on Friday, down 0.04% from previous close. Year to date, the script rose 17.82%.

On 25 October, HDFC Bank reported a steady 20% net profit growth of Rs3,455.33 crore boosted by higher net interest income and other incomes.

“Investors are considering its robust growth profile, superior asset quality and ability to gain market share," said Motilal Oswal, chairman and managing director of brokerage firm Motilal Oswal Financial Services Ltd , in his 25 October report to its investors.“HDFC Bank is well positioned in the current environment, and with strong capacity building amid moderate growth cycle and significant digitalization initiatives, the bank is well placed to benefit from the expected pick-up in economic growth cycle," the report added.

Shares of RIL fell 0.9% to Rs1,001.40, after which the company’s market value stood at about Rs3,24,791.58 crore. The stock has fallen 8% in the last two weeks, while year-to-date is down 1.11%.

Recently, the government slapped a $1.55 billion fine on RIL and its partners BP Plc. and Niko Resources Ltd, for extracting gas from state-run Oil and Natural Gas Corp. Ltd’s (ONGC’s) deep-water block in the Krishna-Godavari basin for seven years.

However, RIL said it is planning to initiate arbitration against the government.

RIL remains convinced of being able to fully justify and vindicate its position that the government’s claim is not sustainable, the company said in a emailed statement on 4 November.

“We felt that the penalty, if any, that RIL could be liable to pay should be limited to the net cumulative earnings before interest and taxes (Ebit) earned by it from the disputed volumes, which we had estimated at Rs16 billion. This is far lower than the $1.55 billion imposed by the government (the latter is admittedly a gross number, which should be $1.15bn net to RIL, in our view)," said Citi research report in a note to its investors on 6 November.

“This effectively almost equals the total revenues earned from the sale of these gas volumes (ie, without allowing operating expense and capital expenditure to be deducted). Even without getting into the merits and justification of the government’s action, the calculation itself in our view appears flawed and the resultant penalty appears grossly exaggerated," the report added.

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