India will get $1 Trillion market cap company by 2035

Recently, when Apple crossed $1 trillion in market cap, it created headlines all across the world. Apple is not the first one to cross this milestone; the honour goes to Petro-China, which achieved the feat in 2007. How-ever, its market cap has gone down by 80 per cent since then. There are three other companies – all from the US – which are close to achieving this landmark. The first is Amazon, which has a market cap of $915 billion; then comes Alphabet, with $870 billion, followed by Microsoft, with $841 billion. Many had thought that the golden period of Apple was over when Steve Jobs, the iconic leader of Apple, died and left the reins of the company in the hands of Tim Cook. But Cook has done a fantastic job to create so much wealth for its shareholders.

That brings us to the question: when can India expect to see its first $1 trillion market cap company? At present, India’s total market cap amounts to $2.24 trillion. In other words, Apple’s market cap amounts to 45 per cent of India’s total market cap. If we add the market caps of Amazon, Alphabet and Microsoft to Apple’s, then the market cap of these four companies together surpass India’s overall market cap by a huge margin. Recently, IMF predicted that the elephant would soon run, implying that India’s growth would be better, going forward. That increases the probability of an Indian company achieving the $1 trillion milestone sooner rather than later.

If you ask the common man which Indian company would be the first to touch the $1 trillion market, the obvious answer would be: either TCS or Reliance Industries. One can’t find anything wrong with this choice either, as these two are India’s most valuable companies and they hail from reputed groups with long records of creating wealth for their shareholders. Also, they have the potential to reach this milestone in the years to come. The market caps of both these companies range at around $100 billion at present and they need to multiply it 10 times to reach the record level. Even if these companies continuously grow their market caps at 15 per cent CAGR, it would take 17 years for them to zoom 10 times from this level. And, if they grow at 20 per cent, then the time taken would be 13 years. Stretching the imagination further, if their market caps grow at an ambitious rate of 25 per cent every year, the time taken would come down to 10 years! Going by past data, 15 per cent looks like a more plausible scenario. That means, we will see a $1 trillion market cap company in India around 2035 and not before. In our calculations, we have assumed that the dollar and rupee rates remain constant during the period taken into consideration. If the rupee falls against the dollar, then it would be difficult to achieve the target by 2035. However, some argue that the rupee may even appreciate against the dollar by 2035. We do not see how this is possible, considering the current economic scenario.

There is also a possibility that neither TCS nor Reliance would reach that level. As they say, historical performance is not a guarantee for what the future holds by way of achievements. These companies may falter in the execution of their strategies or their business models may undergo changes, as 17 years is too long period to be brought within the ambit of speculation or wishful thinking.

TCS is anyway making itself ready for a new technological ambience, involving AI, cloud computing and digitalisation, to stay relevant. And, for Reliance Industries, the launch of its Jio service has created new levels of excitement. Mukesh Ambani, CMD,  Reliance Industries, announced at the company’s last AGM that, going forward, his ambition would be to have equal revenues accruing from old, traditional businesses as well as new businesses, consisting of retail, as also Jio. One eventuality possible here is that Reliance might demerge new businesses into separate companies to get better valuations, in which case the $1 trillion market cap target recedes further away.

When we look at some of the companies that are close to the $1 trillion market cap, we see a few common threads running through all of them. That is: these companies are international in operation; they are high-tech companies; and they are world leaders in the business they operate in. Unfortunately, neither TCS nor Reliance satisfies this criterion at the present moment.

It would not be a surprise, if we see some other company, perhaps not even listed at present, going on to achieve the $1 trillion mark. Remember, TCS was not listed 17 years back. One thing is certain – by 2035 or thereabout, we may have at least one company in that league. That would be the ‘eureka moment’ for the Indian stock market.