After a gap of four years, Reliance Industries pipped Tata Consultancy Services to become India’s most valued company on an intra-day basis with a market capitalisation of over Rs 4.58 lakh crore at today's high price of Rs 1,410 on BSE.
However, its gains eroded on profit booking and it soon lost the tag. RIL shares closed down 1.5 per cent, while TCS' stock ended marginally down by 0.5 per cent.
RIL’s stock prices have jumped 30 per cent in 2017 till date (at today's high price). The company was the most valued company between 2008-2013. After that it has trailed the information technology behemoth in second position (fourth in 2015) due to the investment phase of many of its businesses, including telecom, reduced gas output and concerns/ uncertainty over the Jio launch, followed by pricing (impact on profitability).
The gap between the market capitalisation of the two companies narrowed in January 2017 versus January 2016 according to the last one decade data provided by Capitaline due to the positive response to the company’s Jio offer (including the extended one recently). The same came down sharply after the company extended its free services offer.
Analyst are bullish about RIL’s stock not only because the company’s gigantic investments (mainly energy and telecom) are expected to start yielding fruit (read generate sales) but more due to their cautiously bullish outlook on telecom business.
“The outlook for each of RIL’s business segments remains upbeat. The stock seems to be trading close to its fair value assuming Jio’s enterprise value at $12 billion. However, there is significant scope for value unlocking if Jio delivers on its target of achieving 50 per cent market share and 50 per cent operating margin by FY22. In that happens, Jio’s EV would be pegged at $50 billion, which can swing RIL’s overall market cap to more than $100 billion vs $67 billion estimated in the base case,” pointed out IIFL Institutional Equities.
Phillip Capital recently raised the target price by a whopping 39 per cent at Rs 1,650 on the stock. Before this, Morgan Stanley had the most bullish target price of Rs 1,506.
On the other hand, dark clouds hover over information technology companies’ share prices due to the high base in penetration, slowdown in client budgets, digital transformation, protectionism implication on margins, followed by the recent spike in rupee against the dollar.
TCS is expected to announce its results today evening and investors are nervous especially after the disappointing performance of Infosys.