Reliance Industries Limited (RIL), a household name in India, stands high above the rest of its mighty peers.
And on 28 November, the oil-retail-to-telecom major proved it yet again by becoming the first Indian company to attain a market capitalization (mcap) of Rs.10 lakh crore. In doing so, RIL has further widened the gap with the second most valued company on our bourses Tata Consultancy Company (TCS). TCS’s mcap currently stands at Rs.7.81 lakh crore.
RIL’s stock outperformed stocks of top 10 Nifty companies to soar 10 percent in the past one month and 40 percent in the past one year to achieve the dizzying number.
In dollar terms, the conglomerate’s mcap (it is calculated by multiplying the total number of the outstanding shares of the company with the current market price of each share) now stands at $138 billion. This has enabled it to enter the elite club of energy supermajors by outpacing British oil and gas major BP Plc. with a market value of $132 billion.
Enough of numbers doing the talking.
Let’s now look at the combination of factors that made it possible.
For starters, continued robust performances of Reliance Jio Infocomm and Reliance Retail have played a pivotal role in taking the Mukesh Ambani-led RIL to enviable heights.
Jio, the telecom arm of RIL, even though a late entrant into the space, dented market shares of its established and formidable rivals in no time by offering knockdown rates, free unlimited voice calls and zero roaming charges. The market disrupting bold bet made Jio the largest operator in India in just a couple of years into its launch. And, four years later, it shows no sign of slowing with 10 million new subscribers being added every month.
The stellar journey however has been tinged with worries caused by the bruising price wars that followed Jio’s entry. But with the three big telcos – Vodafone Idea, Bharti Airtel and Jio – deciding to hike tariffs and data charges from December onwards, investors had a strong reason to believe that Jio’s financials would improve further and help RIL pare its massive debts.
Conscious business decisions aside, fate also had a hand in Jio’s rise. In a recent Supreme Court order, telcos have been asked to cough up a staggering Rs.92000 crore in dues to the Indian government as spectrum fees. Vodafone Idea and Bharti Airtel that have been in business for long naturally have been impacted the most while the relatively new Jio, launched in 2016, has remained almost unscathed. This again assured investors of the company’s steady supremacy in the near future.
Reliance Retail, another consumer business under the RIL umbrella, has been a major contributor as well. In the past six years, the retail business has seen a 14-fold increase in profit. And in the fiscal year ended March 2019, it became the first Indian retail company to clock over Rs 100,000 crore in annual revenues.
The core business of oil refining has also fuelled growth all throughout, unfailingly. The gross refining margin, which is the difference between crude oil price and the average selling price of refined products, has steadily risen to offer good returns to investors. This is mainly on account of its state-of-the-art refining facility that can refine almost any kind of crude.
Performances aside, big announcements have gone a long way in bolstering investor sentiments. One of those is chairman Mukesh Ambani’s sound plans to make his conglomerate net debt free by 2021.
To that end, there’s already been an agreement to sell 20 percent stake in the oil-to-chemicals business to oil behemoth Saudi Aramco. Further there have been reports of its plans to sell stakes of its media business – entertainment and new channels – to Sony Corp. and The Times Group. And then there are efforts to monetize its assets, namely the telecom towers and optical fiber networks throughout the country. This would bring in cash and thus give good returns to investors in future.
Other announcements include tapping into the digital business to further retail ambitions to take on Flipkart and Amazon and IPOs.
All these, hopefully, would allow investors to reap a windfall in the future too.