India may see its first $1 trillion company by 2032: ICICI Securities

 New Delhi: India is likely to have its first $1 trillion company by 2032 if the pace of the country’s GDP growth accelerates to around 9 per cent from the current around 7 per cent,  domestic broking firm ICICI Securities said on Monday. 

Three top contenders of this coveted club are: Reliance Industries Limited (RIL), HDFC Bank and Bajaj Finance. 

Mukesh Ambani-led Reliance Industries is presently India’s largest listed company with a market capitalisation (Mcap) of nearly Rs 19 lakh crore (around $230 billion). 

Market capitalisation of RIL is likely to hit the $1 trillion mark by 2032 if its long-term profit growth trajectory jumps to 21 per cent. 

In order to reach the $1 trillion mark by 2032, HDFC Bank would be required to accelerate its profit growth trajectory to 25.5 per cent against its historical profit growth trajectory of around 20 per cent, while Bajaj Finance will need to maintain its past growth rate of 35 per cent-40 per cent over the next decade to reach the $1 trillion mark. 

A key driver of this acceleration in these companies’ profit will be higher economic growth. 

The brokerage firm assumes that the real gross domestic product (GDP) growth will progressively accelerate to 9 per cent from the projected 7 per cent in the current financial year. It also assumes that corporate profitability measured in terms of ‘PAT (profit after tax) to GDP’ ratio will reach its previous peak of 7 per cent from 5-6 per cent now.

“We do not assume any expansion in market valuations from current levels, but a faster-than-GDP expansion of corporate profits will result in Mcap/GDP reaching 160 per cent without any expansion of P/E (price-earnings ratio),”
it said. 

On the rationale for picking RIL, HDFC Bank and Bajaj Finance as probable firms for reaching the coveted milestone, the brokerage firm noted, “Our probable list of stocks that could potentially hit the $1 trillion mark by 2032 is based on their hurdle rate (% CAGR in Mcap required going ahead), which should be in close proximity to their past long-term profit CAGR track record.”