Reliance Industries, HUL, ITC: What's that rare Sensex record these stocks boast?

More than 90 companies have become a part of the benchmark equity index BSE Sensex since its inception in April 1986. It has seen some churn over the years, as some firms dropped out, some merged with other firms, and a few companies like Larsen & Toubro (L&T), Mahindra & Mahindra, Nestle, Tata Steel and Tata Motors were dropped and re-entered. However, there have been three companies that have stood tall and remained in the index over all these years. Any guesses which ones these are?

They are energy-to-telecom behemoth Reliance Industries (RIL), and FMCG majors Hindustan Unilever and ITC, according to the corporate database ProwessIQ. Data available with Ace Equity showed that shares of RIL have surged 5,056 per cent since January 2000, while ITC and Hindustan Unilever have surged 2,984 per cent and 1,030 per cent, respectively. On the other hand, the benchmark BSE Sensex gained 1,157 per cent.

While sharing his views on FMCG majors, Santosh Meena, Head of Research, Swastika Investmart, said, “ITC and HUL are two prominent FMCG giants that play a vital role in the Indian economy and are expected to maintain their leadership positions in the FMCG space. While ITC’s valuation remains reasonable, there is potential for value unlocking in the company. Concerns surrounding ESG in ITC’s cigarette business persist, but its other businesses are displaying strong growth, which could lead to further value appreciation.”

He further said that HUL is likely to sustain its performance, though return expectations should be moderate. The company’s consistent track record and market presence are expected to support its continued success in the FMCG sector. Consolidated gross sales and net profit of ITC have grown at a compounded annual growth rate (CAGR) of 13 per cent and 13.25 per cent, respectively, in the past 20 years. The top line and bottom line of HUL have increased by 9.26 per cent and 9.13 per cent annually (CAGR) during the same period.

On the other hand, gross sales and net profit of RIL increased at a CAGR of 16 per cent and 15 per cent, respectively, during the same period.

“As for RIL, it stands as one of India’s formidable conglomerates, and it is anticipated to continue thriving across its various businesses. Value unlocking is foreseen through the expansion of its telecom and retail ventures, which could result in increased shareholder value,” Meena said.

On asking which is the best stock to invest in at present from the three? G Chokkalingam, Founder, Equinomics Research and Advisory said, “RIL is the best positioned among these three stocks in the medium to long term. Successful diversification into consumer-oriented businesses like retail, mobile telecom and financial services and then unlocking values from these businesses will help the shareholders to create a lot of wealth in the long term. It could outperform both HUL and ITC in the long term.”

He further added that ITC and HUL also would continue to perform well in the long term. But ITC, unless it makes other FMCG businesses the dominant source for both revenues and profits holds uncertainty on its capability to steadily grow wealth for shareholders in the long term. “This is because its cigarette business would come under pressure whenever the government’s fiscal conditions come under stress in the long term. Its other businesses like paper and hotel are highly cyclical while technology business (held through a subsidiary) is poorly growing in dollar term in this country,” he said adding HUL would be second best play among these three companies as its entire FMCG products are growth-oriented, generally non-cyclical and also have least government interventions.

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