RIL becomes 1st Indian co to hit Rs 20 trn m-cap; stock up 29% in 3 months

Mukesh Ambani-led Reliance Industries Limited (RIL) on Tuesday became the first Indian listed company to hit the Rs 20 trillion ($250 billion) mark in market capitalisation (mcap) in intraday trade. 

RIL’s market cap touched a high of Rs 20.01 trillion as its stock hit a fresh intraday high of Rs 2,957.8 on the BSE, surpassing the previous high of Rs 2,949.9 achieved on February 2. The stock finally settled at Rs 2,928.95 with a gain of 0.9 per cent and the oil-to-telecom conglomerate was valued at Rs 19.81 trillion at the close of day’s trade.

In the past three months, the RIL stock has surged 29 per cent, outperforming the Sensex (which is up 10 per cent), amid renewed optimism around its growth prospects. 

The conglomerate reached the Rs 15 trillion mcap milestone in September 2020, after crossing the Rs 10 trillion in market value for the first time in November 2019, according to data provided by Capital Line. The company might have hit the Rs 20-trillion milestone earlier if it hadn't spun off its financial unit, Jio Financial Services, last year. However, this move has helped the Mumbai-based firm unlock value. Jio Fin, which listed separately in August 2023, is currently valued at Rs 1.73 trillion ($21 billion).

A few years ago, RIL and Tata Consultancy Services (TCS) were neck and neck in terms of market cap. Now, however, RIL has a considerable lead over the Tata group flagship, which only crossed Rs 15 trillion in mcap last week. At the group level, Tata is ahead with Rs 30 trillion in total mcap, compared to about Rs 22 trillion for the Reliance group. HDFC Bank, with a market cap of Rs 10.6 trillion, is the third-largest company. Thanks to its high free float market cap, the private sector lender has the highest weighting in the benchmark Sensex and the Nifty.

RIL is the 45th most valuable company globally, ranking behind Netflix and ahead of Pepsico, according to Bloomberg.

Analysts at Centrum Broking, who have a “buy” rating on RIL with a target price of Rs 3,299 per share, believe that with the pan-Indian 5G rollout, RIL is well positioned to monetise the services. In addition, the capital expenditure intensity has come down substantially, which should benefit cash flows. The brokerage firm believes that the growth momentum will continue in the digital and retail sectors, supported by the oil & gas segment.

Analysts at Kotak Institutional Equities (KIE), meanwhile, believe that except for the exploration & production (E&P) business, where earnings have likely peaked, the outlook for each key business remains strong. “In refining, while margin volatility remains high, recent trends are positive, with an improvement in SG (Singapore) complex margins on stronger gasoline cracks. With no retail fuel price cuts despite a correction in international product prices, fuel marketing margins remain strong and should also benefit RIL,” the brokerage firm said in the Q3 result update.

The petrochemical sector remains in a downcycle, driven by large capacities created in China in recent years. In the past few weeks, margins across polymer/polyester chains have firmed up. Overall, analysts continue to expect a gradual recovery in chemicals.

“With pan-Indian 5G rollouts complete, we expect RJio’s focus to shift toward 5G monetisation, with the recent launch of Jio AirFiber (FWA from RJio), launch of higher data allowance plans bundled with content offerings, ramp-up of enterprise services and likely tariff hike in the next few months. In retail, we expect growth to sustain at a fast clip, driven by significant retail footprint expansion over the past two years, rising share of new commerce and forays into FMCG,” KIE said.

However, the stock is trading above the brokerage firm’s target price of Rs 2,900. According to Bloomberg, 24 of 31 analysts polled last month were bullish on the stock, while five had “neutral/hold” and just two had “reduce/sell” rating. Their average one-year target price for RIL was Rs 2,954 per share.