Ranking changes happen slowly. In one day, on Monday, November 2, Reliance Industries made a very big jump up.
Shares of Reliance gained more than 8 percent in one day, pushing the market capitalization above ₹17 lakh crore. At the end of the day, the gains were higher. Business Standard noted that on November 2, there was an increase of 11.6 percent – highest in 6+ years – gaining ₹1.83 lakh crore in market value.
There is a difference in reports on the amount of increase in ranking due to the different time of reporting, and the Hindi report estimated it as 12 percent.
The leap took the corporation back to the world club. According to Pratahkal, Reliance became the part of the world’s top 100 companies at the 99th place having the market capitalization of $187.39 billion as the only Indian corporation in the ranking.
It should be noted that according to the same report, Nvidia took the first place, and Apple took the second place. The rankings can vary from the data provider and the day’s exchange rate.
The catalyst was a good quarter performance. In the September quarter, outstanding fuel and petrochemicals margins drove the firm to earn its highest-ever income and profits.
As per Reliance, "Jio Platforms revenues increased by 11.3% YoY to ₹47,485 crore, and EBITDA increased 16.6% YoY to ₹21,879 crore, driven by a higher subscriber base and high average revenue per user (ARPU)."
Another reason behind this was the initial public offering of Jio. The stock-market listing of Jio Platforms was completed post-quarter. This was done following a record share offering back in October.
The use of most of the funds from the IPO for repaying borrowings externally will enhance financial flexibility in the digital business segment. This is what the analysis also mentioned in relation to the sustainability of monetization through Jio.
The telecommunication division is quite huge. Jio ended the quarter with 300 million 5G customers and 30 million fixed broadband subscribers.
However, there were some issues with the picture as well. The company still incurred some expenses related to the special additional excise duty and under-recoveries in the Jio-bp fuel retailing operation.
It remained unclear whether the increase would be sustained. There appeared an article on Business Standard entitled “Can the rally continue?” which highlighted that the one-day increase does not ensure further growth.
Reliance has previously made it to the top 100. According to Business Standard in 2020, Reliance was the only Indian company making the global top 100. It was ranked 57 in that year, partly because of investments in its telecoms company by foreign investors.
The recent reports indicate that it had fallen off the list in the meantime, which explains why it is referred to as returning to the top 100. The reports examined did not mention when it fell off.
It is necessary to consider what this ranking ranks. It ranks the market capitalization which is influenced by the share price, and it could decline just as easily as it could increase. It does not rank the revenue or profit of the company.
The performance of the quarter together with the listing have altered the investors' attitude. This is different from saying that the value of the company is set.
There are several factors that will be relevant in the upcoming weeks. These include whether Reliance retains its gains in the immediate aftermath. The second one involves how the newly listed Jio stocks perform, since they influence the valuations of the parent company. Whether Reliance maintains its margins is the third factor.
There has been no indication of any new valuation target by Reliance from the reports considered.
