RIL’S market cap tops ~19 trn intraday

Bets on new energy and oil-to-chemicals among reasons for the surge, say analysts

Reliance Industries (RIL) on Wednesday became the first Indian company to hit the ~19-trillion mark in terms of market capitalisation (m-cap) in intraday trade, as bets on new energy and oil-to-chemicals cheered investors.

Shares of the company jumped 1.85 per cent to its record high of ~2,827.10 during the day on the BSE, pushing up the market capitalisation of the firm to ~19.13 trillion. They finally settled at ~2,777.90 apiece, up 0.08 per cent, with an m-cap of ~18.79 trillion.

Last week, too, RIL’S market value was within touching distance of the ~19-trillion mark, with analysts saying that it was only a matter of time for the company to cross the hump. In March, the company topped ~18 trillion m-cap, while in October last year, it crossed the ~17-trillion mark.

“RIL is firing on all cylinders because its petchem business is doing extremely well on the back of a surge in oil and gas prices; the benchmark Singapore complex gross refining margin (GRM) is at an all-time high. Its telecom business is unaffected by geopolitical tensions and inflation. And it is exploring synergies in its retail business. At the same time, its renewable energy business is opening up opportunities for the company,” said Santosh Meena, head of research at Mumbai-based brokerage Swastika Investmart.

On Tuesday, RIL and the Abu Dhabi Chemicals Derivatives Company RSC (TA'ZIZ) signed a formal shareholder agreement for a chemical project in Ruwais, Abu Dhabi. The $2-billion project would focus on chlor-alkali, ethylene dichloride (EDC), and polyvinyl chloride (PVC) production, which is used in a wide range of industrial applications. This was expected to unlock new revenue streams for RIL, analysts said.

The conglomerate derives over 60 per cent of its revenue and over 50 per cent of its operating profit from the oil-to-chemicals (O2C) business. This includes refining, petrochemicals, and fuel retail. Retail and telecom, on the other hand, contribute 29 per cent and 17 per cent each to revenue, said analysts tracking RIL. Contribution to the operating profit stood at nearly 45 per cent for retail and telecom put together, they said.

Though new energy, especially RIL’S foray into green hydrogen, is a recent step by the company, analysts estimate that it will become an important vertical, as the Indian government bets big on the sector with the launch of a green hydrogen policy in February.

"RIL alone has earmarked ~5.6 trillion in renewables infrastructure, including generation plants, solar panels and electrolysers. The strategy is to capture the entire value chain of green hydrogen,” said G Chokkalingam, founder & managing director (MD), Mumbaibased Equinomics Research & Advisor.

The new energy bet has prompted Morgan Stanley to raise its target price for the stock by 20 per cent to ~3,253 apiece. “We expect up to a 10 per cent boost to RIL’S NAV (net asset value) in anticipation of quicker hydrogen monetisation,” the brokerage said in a report last week.

“We also estimate hydrogen can achieve a 14-15 per cent ROCE (return on capital employed) for RIL. As the green hydrogen ecosystem is rolled out, it will also raise demand for RIL’S solar panels,” it added.

The company has in the past few months acquired players, such as REC Solar, for growing its in-house solar panel manufacturing. It has also acquired capabilities in energy storage, with stakes in companies, such as Ambri (for liquid metal batteries), Lithium Werks (lithium iron phosphate batteries), and Faradion (sodium-ion technology).