HDFC, Reliance in fray to become India's first trillion-dollar company
ICICI Securities predicts that one of three Indian giants—HDFC Bank, Reliance Industries, or Bajaj Finance—could become India's first company to achieve a market value of $1 trillion by 2032. This forecast is based on factors such as a consistent 5.8% market cap ratio for the largest stock, a 7% PAT to GDP ratio, and real GDP growth increasing from 7% in FY24 to a peak of 9%.
ICICI Securities favours HDFC Bank
ICICI Securities favors HDFC Bank, with its 25.5% hurdle rate and 20% historical profit growth, expecting a valuation re-rating. For RIL to hit the $1 trillion mark, it needs a 21% long-term profit growth, while Bajaj Finance must maintain a 35-40% growth rate, assuming no P/E re-rating. ICICI Securities believes that GDP growth will be fueled by factors such as capex, re-leveraging, discretionary consumption, and productivity gains from significant digitalization advancements.
Historical context and global comparison
In 2001, the largest stock's market cap was $10 billion, which skyrocketed to $100 billion by 2007 due to a bullish market and a significant increase in the corporate profit cycle, resulting in a record PAT-GDP ratio of 7%. This led to an all-time high market cap to GDP ratio of 160%. Presently, only six companies worldwide have a $1 trillion market cap. Microsoft leads with $2.9 trillion, followed by Apple at $2.87 trillion and Saudi Aramco at $2.1 trillion.
