With its market capitalisation growing at an average annual run rate of Rs 1 lakh crore in the last two decades, billionaire Mukesh Ambani-owned Reliance Industries is undoubtedly the largest wealth creator in the history of Dalal Street. After India’s most valued stock touched the Rs 20 lakh crore milestone this week, it is now bigger than the likes of American MNC giants like McDonald’s, PepsiCo, Netflix and Accenture.

Shareholders of RIL, which was worth just Rs 1 lakh crore in August 2005, have made a notional profit of Rs 19 lakh crore in a span of less than 19 years.

RIL hit the Rs 5 lakh crore m-cap feat in July 2017, Rs 10 lakh crore in November 2019, and Rs 15 lakh crore in September 2021 while the Rs 20 lakh crore landmark was achieved on 13 February 2024.

With analysts expecting 2024 to be an eventful year for RIL as the past two years of investments move into the monetization phase, stock prices have jumped 28% in the last 3 months alone.

The peerless conglomerate can’t be compared to other listed or unlisted companies in India because it houses well-diversified businesses of petrochemicals, new energy, telecom and retail. In absolute terms, the stock is nearly double of HDFC Bank and roughly 3 times the size of ICICI Bank and Infosys.

Mukesh Ambani fuelling India’s $1 trillion dream

In US dollar terms, RIL is worth around $241 billion and is the only Indian company to feature in the list of world’s 50 most valuable companies. At No. 42, it is bigger than American giants like PepsiCo, McDonald’s, Shell, Cisco, Walt Disney, Netflix and Accenture, shows data from Companies Market Cap (as on 14 Feb 2023).

Tata Consultancy Services or TCS, which is India’s second largest company, is worth about Rs 15 lakh crore and at No.66 on the list of world’s biggest companies. HDFC Bank (Rs 10.6 lakh crore) is the third and last Indian stock which finds a place in the world’s top 100 list.

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While RIL looks like a colossus on Dalal Street, it is worth just 8% of the largest stock on Wall Street. Globally, there are seven $1 trillion stocks, with Saudi Aramco (listed in Saudi Arabia) being the only non-American stock in the elite club.

Valued at $3 trillion, Microsoft is the most valued company on earth after snatching the crown from Apple ($2.8 trillion) recently.

Others in the $1 trillion club are Alphabet (Google), Nvidia, Amazon and Meta Platforms (Facebook).

The hunt for India’s first $1 trillion stock shows that there are three candidates – HDFC Bank, RIL and Bajaj Finance. Calculations done by ICICI Securities shows that RIL could make it by 2032 if its profit growth trajectory jumps up to about 21% against 10-year PAT CAGR of 13%, assuming no PE re-rating.

“The macro framework is based on the assumption of reaching peak corporate profitability (~7% ‘PAT/GDP’ ratio) in the listed space driven by gradual advancement towards peak GDP growth of ~9%. Other key assumptions include – ratio of the largest stock’s m-cap to aggregate m-cap sustaining at long-term average of 5-6% and no re-rating in P/E ratios from current levels,” said Vinod Karki of ICICI Securities.

Based on the historical average number of companies with market value greater than a-tenth of the top company’s m-cap, it is likely that around 30-40 stocks with $100 billion size may exist in 2032, he said.

What’s next for RIL?

RIL’s Q3 results showed that its capex at $3.6 billion fell 22% quarter-on-quarter to 2-year-low as Jio’s capex declined on completion of 5G pan India rollout. Retail capex was also low on muted new store rollout.

“We think investment cycles will be shorter than in the past two decades, with limited impact on balance sheet leverage. The key to watch will be the startup of revenues from the new energy vertical, which we believe remains most underappreciated in NAV,” Morgan Stanley’s Mayank Maheshwari.

A turn in the chemical cycle, a golden age for refining, traction in 5G subscribers and a slowdown in investments in retail could be among key events that garner investor traction, he said.

RIL will also benefit from its robust free cash flow generation of Rs 30,000 crore in FY25, declining capex levels to Rs 1.25 lakh crore and declining debt levels to Rs 2.72 lakh crore. Commencement of new energy operations will be a key event in coming quarters for RIL, analysts say.

It is expected that Jio may opt for a tariff hike after the Lok Sabha elections while retail will see revenue per square foot improving as store additions slow and older stores mature.

If RIL becomes India’s first $1 trillion stock, the personal wealth of the Ambani family will also zoom as they own more than half of the conglomerate.

(Data: Ritesh Presswala)

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)

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