RIL can become 1st Indian firm to hit $200 bn m-cap

New Delhi: Reliance Industries in 24 months can become the first Indian company to reach $200 billion market cap on the back of its new commerce venture and fixed broadband business, Bank of America Merrill Lynch said on Wednesday.

In a report, the brokerage said the key drivers necessary for Reliance to breach $200 billion market cap in 24 months from current $122 billion market cap are new commerce initiative of empowering Kirana's in unorganised retail market by offering MPoS (mobile point-of-sale), entry into SME enterprise space with Microsoft, Jio's fiber broadband business and digital initiatives like advertising.

"We think the market is giving little credit to these initiatives given limited visibility," it said. "We expect near-term momentum to be strong." Its bull case scenario that takes m-cap to $200 billion assumed Jio's per mobile phone user revenue increasing to Rs 177 in FY22 from Rs 151, 10 million Kirana's paying the company Rs 750 a month for installing M-PoS, and broadband users reaching 12 million by FY22 with 60 per cent of them paying an average of Rs 840 a month.

"In our bull-case, we look at a 24-month fair-value of the company as we believe most of the new businesses which are in gestation period will take around 24 months to acquire scale and contribute meaningfully to RIL's fair value," it said.

Reliance Industries (RIL) is India's largest petrochemical and second-largest oil refining company. It has significant investments in telecom, consumer retail and media businesses in India. Its telecom subsidiary, Jio has garnered a large number of paying subscribers and has the opportunity to emerge as a top-three telecom player in a growing Indian market on the back of the launch of fiber-based broadband services.

The report said the "upside from base-case is predominately driven by new commerce gaining scale and helping B2B retail momentum as well ($32 billion in additional enterprise value); Jio gaining traction in enterprise, fixed broadband business + better than expected ad revenues/upselling services ($222 billion in additional EV); more pronounced telecom tariff hike ($10 bn in additional EV); and better than expected IMO contribution + lower capex for a couple of year".