ICICI Securities Predicts $1 Trillion Market Cap for HDFC Bank, RIL, or Bajaj Finance by 2032

HDFC Bank Tipped as Most Likely to Achieve $1 Trillion Market Cap by 2032: ICICI Securities

ICICI Securities, in its latest strategy note, has projected that India may witness its first trillion-dollar company by market capitalization (m-cap) by the year 2032. The brokerage firm anticipates that by 2032, there could be around 30-40 stocks with a market cap of $100 billion or more, based on historical averages of companies with m-cap greater than one-tenth of the most-valued company’s m-cap. This forecast reflects the potential growth and scale of certain Indian companies in the coming years.

ICICI Securities has identified HDFC Bank Ltd as the most likely candidate to become India’s first trillion-dollar company by market capitalization (m-cap) by 2032. The brokerage suggests that HDFC Bank has the potential to achieve this milestone with a hurdle rate of 25.5 percent.

Additionally, the note mentions that Reliance Industries Ltd (RIL) could reach a trillion-dollar m-cap if its profit growth trajectory accelerates to 21 percent. Bajaj Finance Ltd, according to ICICI Securities, would need to maintain its historical growth rate of 35-40 percent over the next decade to achieve a $1 trillion m-cap.

The note from ICICI Securities outlines that HDFC Bank’s hurdle rate of 25.5 percent, compared to its historical profit growth trajectory of 20 percent, positions the stock as a prime contender for achieving a trillion-dollar market capitalization with potential for valuation re-rating. Reliance Industries Ltd (RIL) is considered capable of reaching the trillion-dollar mark if its longer-term profit growth trajectory accelerates to 21 percent. For Bajaj Finance Ltd to achieve a $1 trillion market cap, it would need to maintain its historical growth rate of 35-40 percent over the next decade, assuming no P/E (Price-to-Earnings) re-rating.

ICICI Securities highlighted the historical trend, noting that the highest market capitalization for any stock in 2001 was $10 billion, and it escalated to $100 billion by 2007 during a bull market phase driven by a substantial lift in the corporate profit cycle. This period was marked by an all-time high profit after tax-to-GDP ratio of 7 percent.

The market capitalization-to-GDP ratio reached an all-time high of 160 percent during this period. The brokerage emphasized the illusory nature of point-in-time P/E (Price-to-Earnings) ratios and the fundamental basis of CAPE (Cyclically Adjusted P/E) ratios, pointing out that the CAPE during the 2007 peak stood at an outlandish 35 times compared to a point-in-time forward P/E of 20 times.

ICICI Securities based its macro framework on the assumption of reaching peak corporate profitability, with a 7 percent profit-to-GDP ratio in the listed space, driven by a gradual advancement toward peak GDP growth of 9 percent. Key assumptions also include the ratio of the largest stock’s market capitalization to aggregate market capitalization sustaining at a long-term average of 5-6 percent, and no re-rating in P/E ratios from current levels.

The brokerage used micro-level verification by screening stocks that have exhibited historical profit after tax (PAT) growth in the vicinity of the hurdle rate required to reach a $1 trillion market capitalization by 2032, assuming no P/E re-rating.