Since the COVID-19-induced lockdown until now, one company that managed to make the most of the opportunity is Mukesh Ambani-led Reliance Industries Limited (RIL). Today, the market capitalisation of the company stands at Rs 15.29 trillion (around USD 207 billion).
During the sell-off period triggered by COVID-19 in March, RIL’s market capitalisation had fallen to around Rs 5.39 trillion. But today in less than six months’ time, it is around three times more than what it was in March. The shares of RIL had zoomed around 166 per cent from its 2020 low of Rs 867 per piece.
The company’s valuation today is even more than IT company, TCS and private lender, HDFC put together.
The company has become the first Indian company to cross USD 200 billion mark and in terms of valuation, it is the 44th largest company in the world.
In the quest to unlock the value for the company, RIL managed to uplift the market sentiments as well. When investment sentiments were low, RIL managed to revive it at some level, stated a person familiar with the matter.
RIL’s telecom business, Jio, attracted around Rs 1.20 trillion in form of investments from more than 10 investors. In addition, it also raised around Rs 53,124 crore from a rights issue and Rs 7,500 crore by selling stake in Reliance Retail to Silver Lake.
Today, the company has managed to become debt free by unlocking its value. “But the only trouble today is that the company is overvalued,” stated an analyst. The reality is that the valuation will continue to rise even further as it is in talks with Amazon, KKR & Co and others to invest in the retail business, added a person familiar with the matter.
Since March 31, RIL has moved up by 111 per cent while Nifty went up by 33 per cent. NIFTY50 has seen a consistent upward trend across sectors and stocks over the past six months.
Speaking to The Free Press Journal, Sameet Chavan, chief analyst -- technical and derivatives, Angel Broking said, “On Thursday, RIL contributed nearly 85 per cent of Nifty’s gains and banking continued to underperform. Technically, if RIL had not rallied much, we wouldn't have been beyond 11, 350. But practically as we very well know, this is how index management happens.” Chavan added, “If something underperforms, some or the other heavyweights come for a rescue and vice versa.”
Adding to it, Vikas Jain, Senior Research Analyst at Reliance Securities, “No doubt, Reliance is one of the largest gainers in index heavy weights but we have witnessed sharp upwards trends in IT, Autos, Pharma, Metals, and high-quality NBFC’s and consumer sectors over the same period.”
RIL had a role to play in this rally in the stock market, but the banking sector is also a stronger performer. This is mainly because private banks have raised the capitals in the form of QIP over the past few months. Jain added that the valuations of the banks are trading below the long-term averages and has the potential to move 20-30 per cent over the next few quarters.