What are Multinational Corporations (MNCs)?

Multinational Corporations are organizations that function in more than one country apart from their home country. MNCs have a foreign shareholding of over 50%, and the management is controlled by those foreign companies. MNCs operate under three kinds of business models.

• Centralized Model: In this model, the company has a centralized headquarters under which it operates. It further builds its manufacturing units in other countries where it is working.
• Regional Model: In this model, the company has its headquarters in one country only. It further supervises its other subsidiaries and offices located in other countries.
• Multinational/transnational Model: This model is a combination of the other two types of model. Here, the parent company works in its home country independently. Simultaneously, its affiliates and subsidiaries also operate independently.

 

List of Best MNC Stocks in India

When it comes to MNC stocks, investors look upon these stocks due to growth, brand image, reputation, and technological proficiency. MNCs are generally favorably capitalized and are exposed to low debt with a dividend policy.

Multinational corporations (MNCs) operate in primary, secondary and tertiary sectors, including agriculture, mining, manufacturing and services. MNCs leverage advanced technology and large-scale operations to enhance productivity and efficiency, playing a significant role in global supply chains and economic development. Here is a list of the best MNC stocks to buy in India in 2024:

Company	CMP- Jan’23	BSE Script Code	NSE Symbol	Rating	Industry
Nestle India	19,572	500790	NESTLEIND	5	Packaged Food
HUL	2,558	500696	HINDUNILVR	5	Personal Product
Bata India	1,654	500043	BATAINDIA	0.5	Footwear
Honeywell	40,902	517174	HONAUT	2	Elect. Equip.
Mphasis Ltd.	1971	526299	MPHASIS	3	IT
Oracle Financial Services Software	3,030	532466	OFSS	4	IT Consulting & Software
Castrol India	125	500870	CASTROLIND	4.5	Oil Marketing & Distribution
Bosch Ltd	17,180	500530	BOSCHLTD	2	Auto Parts & Equipment
Britannia Industries Ltd	4,292	500825	BRITANNIA	4	Packaged Foods
Abbott India Ltd	21,351	500488	ABBOTINDIA	4	Pharmaceuticals

 

Key Factors Investors Must Look at When Investing in Best MNC Stocks

Before you initiate investing in MNC stock, it is vital to consider several factors influencing these stocks. Here are those key factors that you, as a wise investor, should look at while shortlisting MNC stocks.

 

History Background of Parent Company

Knowing the backstory of MNCs’ parent company is as important as its subsidiaries in countries other than the home country. It will help you with understanding their business management. You can gauge the capability of MNCs by identifying their experience and witnessing many business cycles across all continents. For instance, Siemens has 153 years of experience and is the oldest MNC in India.

 

Corporate Governance Standards

Identify if the company has top-notch management and high corporate governance standards before investing in MNC stocks. You must pick any MNC stocks on the basis of safety in terms of your going concern status. Simultaneously, you will feel more confident in your investment. For instance, companies like Nestle and Bata have rarely encountered issues under corporate governance in their management in past years.

Top and Bottom Line Growth

Look if the company is growing consistently and performing well every year. Not only should you look at the company’s history and corporate governance but also its last five years of sales and profitability. Make sure these parameters are higher than its domestic competitors.

 

Return Ratios

Investors must consider return on equity before investing in MNC stock. These ratios present a true picture of how the company’s operational performance is and how it is managing its equity and debt.

 

Dividend Yields

MNC stocks are best known for rewarding their shareholders with high share dividends. MNCs became the biggest beneficiaries when the government of India in the Budget 2020 abolished the DDT tax.

 

Key Risks to be Considered When Investing in MNC Stocks

Though MNC stocks are a good option for investing, there are a few risks you need to consider, which mainly involve:

 

Limited Control

The MNCs are usually managed by their parent companies. Thus, higher control of MNCs over their subsidiaries can adversely affect stocks or subsidiaries companies. It is because the parent company can anytime decide to stop or disinvest funding to their subsidiaries. The parent company can also transfer the major components of subsidiary companies like R&D, plant and machinery etc.

 

Royalty Concerns

With royalty, the parent company expects a periodic cut from all its subsidiary units in various countries. The charges of this could run a wide range based on their ability to render the service. The parent company might as well achieve this objective by stealing the profits from its subsidiaries by imposing high royalty fees, negotiating expensive contracts or increasing the license fees.

 

Key Metrics of MNC Stocks

To determine which MNC stocks are the best, it is important to evaluate those on the basis of multiple key metrics. These parameters include price-to-earnings ratio, price-to-sales ratio, return on equity, debt-to-equity ratio, dividend yield and earning growth. 

Company	P/E Ratio	Price to Sales	Return on equity (%)	Debt to equity	Dividend Yields (%)
Nestle India	71.3	11.7	113	0.12	1.01
HUL	62.7	10.7	18.4	0.02	1.32
Bata India	68	6.41	5.74	0.95	0.24
Honeywell	95.3	11.7	12.5	0.02	0.22
Mphasis Ltd.	23.3	2.74	21.2	0.15	2.37

 

Conclusion

Investing in the best MNC stocks in India offers investors stability, growth potential, and global exposure. All these make them an attractive and high-return investment choice. If you look forward to investing in MNC stocks, try investing in multiple MNCs to diversify and mitigate risks to maximize your returns.

 

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Disclaimer: This blog is posted solely for educational purposes. The securities mentioned are examples and not recommendations. It is based on various secondary sources from the internet and is subject to change. Kindly consult an expert before making any related decisions.