The Race to be India’s First Trillion-Dollar Company

India’s economy has witnessed significant growth in recent years, with several companies emerging as powerhouses in their respective industries. The race to become India’s first trillion-dollar company by 2032 has gained immense attention and speculation, with a few players emerging as key contenders to grab honours.

The Contenders

HDFC Bank is one of the leading financial institutions in India, known for its robust banking services and innovative products. With a market capitalisation of $136 billion as of Feb 2024, it is already one of the most highly valued firms in India. ICICI Securities, a prominent brokerage firm, has projected HDFC Bank as a potential candidate to reach a trillion-dollar market cap by 2032. The bank’s consistent profitability and historical growth make it a strong contender in this race.

Reliance Industries Limited (RIL)

Reliance Industries Limited, led by billionaire Mukesh Ambani, is a conglomerate with interests in various sectors such as petrochemicals, refining, telecommunications, and retail. RIL has witnessed exponential growth over the years and currently boasts a market capitalisation of almost $237 billion. Its ambitious ventures, such as Jio Platforms and Reliance Retail, have contributed significantly to its valuation. Given its track record and aggressive expansion plans, RIL is a prime contender for the title of India’s first trillion-dollar company.

Bajaj Finance

Bajaj Finance is a non-banking financial company (NBFC) that offers a wide range of financial products and services, including consumer loans, business loans, and insurance. The company has shown remarkable growth in recent years, with a market capitalisation of around $49 billion. ICICI Securities has identified Bajaj Finance as another potential candidate for the trillion-dollar mark, provided it sustains its impressive growth rate of 35-40%.

The Path to a Trillion-Dollar Valuation

ICICI Securities’ Projections

In a report, ICICI Securities has laid out projections for the market capitalisation of these companies based on various factors. They estimate a sustained largest stock’s market capitalisation to aggregate market capitalisation ratio of 5.8%, a PAT (Profit After Tax) to GDP ratio of 7%, and real GDP growth progressing from 7% in FY24 to the previous cycle’s peak of 9%. These assumptions form the basis for their projection of a trillion-dollar market cap by 2032.

Factors Driving Growth

Several factors contribute to the potential growth of these companies:

Digital Transformation

Embracing digitalisation and leveraging technology can lead to increased efficiency, cost savings, and improved customer experiences. Companies that successfully navigate the digital landscape are likely to witness substantial growth.

Market Expansion

Expanding into new markets and diversifying product portfolios can drive revenue growth and increase market share. Companies that identify untapped opportunities and establish a strong presence in emerging sectors are poised for success.

Innovation and Disruption

Keeping pace with changing consumer demands and technological advancements is crucial. Companies that innovate and disrupt traditional business models have a higher chance of achieving significant growth and valuation.

Macroeconomic Factors

Favourable economic conditions, such as increased consumer spending, infrastructural development, and government initiatives can create a conducive environment for companies to thrive.

Challenges and Risks

While the contenders for the trillion-dollar mark in India have immense growth potential, they also face headwinds that could impede their progress:

Regulatory Environment 

Changes in regulations and policies can impact business operations, profitability, and growth prospects. Needless to say, adapting to evolving regulatory frameworks is essential for sustained success.

Fierce Competition

The race to become India’s first trillion-dollar company is not exclusive to these contenders. Other companies, both domestic and international, are vying for a larger market share. Intense competition can pose challenges and affect growth trajectories.

Market Volatility 

Economic uncertainties, global events, and market fluctuations can impact stock prices and market valuations. Companies must navigate through volatile market conditions to maintain their growth momentum.

Disruptive Technologies 

Rapid advancements in technology can disrupt traditional business models and render existing products or services obsolete. Companies need to stay ahead of the curve by embracing innovation and leveraging disruptive technologies.

Editor’s Pick: Reliance Industries Limited

Let’s face it, Reliance is already the biggest company in India, accounting for around 4 – 6% of India’s total market capitalisation. For a perspective of their potential, Reliance’s market cap to GDP ratio is 6.4%, while Apple’s market cap to GDP Ratio is 10%. What’s more, Reliance’s market cap has grown at 20% CAGR in the last 10 years against Nifty’s 13%. As per Morgan Stanley, the Indian stock market will reach the $10 trillion market cap by 2030. And if the Nifty continues to grow at 11%, Indian stock market capitalisation will reach $15 trillion by 2034. A quick back-of-the-envelope calculation shows that based on 6% of stock market capitalisation, Reliance can easily become a $900 billion company. The trillion dollar mark isn’t that far.

Reliance is a shrewd operator, having harnessed the Oil to Chemical value chain as its growth engine. And now, with the tides of energy changing, it is going to change its focus to renewable energy and green hydrogen. But it isn’t just an energy player; with a multitude of interests, RIL will be a major player in the Indian landscape for a long time to come. We’re not betting people, but if we were, RIL would be the horse we back.

In Conclusion

India’s journey towards producing its first trillion-dollar company by 2032 is an exciting race to witness. HDFC Bank, Reliance Industries Limited, and Bajaj Finance are strong contenders, each with its unique strengths and growth potential. While the path to trillion-dollar valuation is not without challenges, these companies have the capability to overcome obstacles and emerge as global leaders in their respective industries. As India’s economy continues to grow, the race for the first trillion-dollar company symbolizes the nation’s ascent as a global economic powerhouse.

Disclaimer: The views and opinions expressed in this article are solely those of the author and do not constitute financial advice. Readers are advised to conduct their own research and consult with certified experts before making any investment decisions.