Last week, Reliance Industries (RIL) achieved the coveted milestone of crossing $200 billion in market capitalisation. There are less than 50 firms globally which are valued at more than $200 billion.
Morgan Stanley analysed how the Mukesh Ambani-led firm stacked up against eight global firms when they crossed the $200-billion milestone.
For instance, when video-streaming company Netflix crossed $200 billion in market cap in June, it had one-year forward revenues of $29 billion, against $83 billion for RIL ($41 billion excluding energy business). Its price-to-earnings (P/E) multiple was 52x compared to 28x for RIL (ex-energy). All other tech gaints Amazon, Tencent, and Facebook also traded at much higher valuations compared to RIL when they crossed the $200-billion valuation mark.
“RIL’s $200 billion market cap does not reflect very aggressive forward multiples when compared to technology or even energy peers when they reached this milestone,” observed Morgan Stanley analysts Mayank Maheshwari, Ridham Desai, and Simeon Gutman in a note.
The jury is still out on whether RIL should be valued like FAANG stocks. Notably, RIL’s one-year forward revenues for the digital and retail businesses are much lower than what Amazon, Apple or Walmart had.
Also, Ebitda for ex-energy business is currently similar to Netflix, but much lower than many other tech and retail giants, observed the brokerage.