During the week, Reliance Industries became the first even Indian company to scale market cap of Rs.1,00,000 crore and that was always on the cards. In fact, TCS is close behind and HDFC Bank is also not too far away. But the level of Rs.10 trillion has a much larger significance from the point of view of Indian capital markets as well as from the point of view of the capacity of RIL to constantly adapt to changes.
Big time wealth creator
When RIL came out with its IPO in the year 1977, it had a market cap of a mere Rs.10 crore. Over the last 42 years the market cap of RIL has grown by nearly 1 lakh times. In other words, an investment of Rs.1000 in RIL in 1977 in its IPO would be worth Rs.10 crore today. To put the returns in perspective, this will translate into compounded annual returns (CAGR) of 31.5% per year over the last 42 years. This is only the capital appreciation part of the story. If you add the average dividend yield of 1.4% that RIL has averaged over the years, then your average CAGR on the stock would be 33%. That explains why the stock has been one of the finest wealth creators in the last 4 decades. This comes at a time when the Sensex has actually grown by 410 times over the same period giving CAGR returns of around 17% annualized. Clearly, RIL has outperformed the index by a huge margin. Interestingly, 70% of this wealth was created in last 3 years.
Reliance telecom story
Back in late 2016, when Reliance Jio was officially launched in the market, the company had a market capitalization of Rs.3,25,000 crore. That means; close to 70% of the wealth has been created in the last 3 years and that too in a sector where other players have struggled to even survive; leave alone thrive. Look at what happened to Indian telecom in the last 3 years. Smaller players have either merged out or have been forced to exit. While Bharti picked up smaller telcos, Vodafone and Idea created a behemoth by merging. Despite all these efforts, Reliance Jio has managed to emerge as the largest player in the telecom space with a clear focus and leadership in data. Above all, Jio does not have to worry about huge liabilities like the AGR and outstanding spectrum costs; the way Bharti and Vodafone need to be concerned.
It is all about adaptation
If you were to describe the growth of RIL in one word, it is adaptation. From textiles to petrochemicals to refining and digital technology: RIL has managed to stay ahead of the curve and disrupt the industry as a whole. That is something that positions RIL as a young company despite its size and legacy. One can argue that the size of RIL is still much smaller compared to global giants but that could be unfair. For India, RIL remains the leader of the equity cult! ©