Poor little rich boys

The meltdown has wiped away 61 per cent of the wealth of the country’s top billionaires.

DLF’s K P Singh — KP to his friends — an army officer who quit the service to join his father-in-law’s Delhi Land & Finance in 1961, became, in 2007, after he listed the firm, the world’s richest real estate baron. The offering helped him boost his fortune to Rs 85,666 crore on his company's listing day in 2007. In January 2009, a 50 per cent drop in demand and a 20 per cent drop in real estate prices, and correction in real estate stocks, saw him lose Rs 31,657 crore or 63 per cent of his wealth. The meltdown has forced one of India’s biggest real estate developers to defer plans to raise another $1.5 billion by listing an arm in Singapore. (Click here to download the entire list)

Fellow developer Unitech’s Ramesh Chandra was worse off. The sixth richest man in India in 2007 dropped 12 places to 26th rank in 2009 as the correction in realty stocks saw his wealth shrink by Rs 52,788 crore or 93 per cent. A structural engineer, Chandra moved into real estate in 1985 to build middle-class homes. The credit crunch and fall in stock prices has restrained the developer’s ability to raise money to fund Unitech’s homes, offices and shopping malls in Delhi’s suburbs, and across other cities in the country.

In many ways, the change in fortunes of these two developers summarises the story of the country’s billionaires this year. The law of nature has been brutal on them — the bigger they were, the larger has been their loss of wealth. Mukesh Ambani, the country’s wealthiest Indian, lost Rs 1,39,925 crore, or 58 per cent of his wealth, as his flagship Reliance Industries fell on concerns of flagging demand for petroleum and petrochemicals in its key export markets in the West, and the delay in kicking off gas supplies from the Krishna-Godavari basin.

Brother Anil Ambani, the second wealthiest Indian, lost Rs 1,10,082 crore, or 66 per cent of his wealth, as his flagship Reliance Communications fell in line with the broader market even as buyout talks with South African telco MTN failed. Mega power projects under Reliance Power will test his execution skills.

While the brothers retained the top two slots, telecom czar Sunil Mittal swapped places with DLF promoter K P Singh to move up a rank to No 3, while Singh settled for No 4 despite eroding his wealth 80 per cent.

Several billionaires in the realty and infrastructure space lost 80-89 per cent of their wealth this year. This included JK Jain of Jai Corp (his son Anand Jain, is a close associate of RIL CMD Mukesh Ambani), which is setting up two SEZs near Mumbai; PNC Menon and family of Shobha Developers; Ravi Purvankara of Purvankara Projects; Rakeshkumar Wadhawan of HDIL. Perhaps the only exceptions were Vyomesh M Shah and Mahipatray V Shah of Akruti City, who lost only 41 per cent of their wealth.

Among the biggest losers was Tulsi Tanti of Suzlon Energy, who fell eight places in the billionaire rankings to settle at 20th place. Tanti lost 86 per cent in the 12 months trailing January 2009 as the wind turbine maker’s stock came under fire after Edison International, one of its biggest customers in the US, cancelled an order for 150 turbines after cracks appeared in the rotor blades. Customers were reassured only when Suzlon shipped out new turbines made of reinforced plastic. Its biggest acquisition, Repower (which makes large turbines), has been a roller-coaster ride. Its initial financing plans fell through when markets crumbled. In late December, it announced it would pay ¤270m to increase its stake to 91 per cent, as required under German law to control the company. In early January, Suzlon sold a 10 per cent stake in its Belgium arm, Hansen, to a London-based investment firm for an undisclosed amount. This could help Tanti bridge the gap and gain control of Repower.

Another big loser was metals maven Anil Agarwal, with interests in aluminium, copper and iron ore, who saw his wealth shrink by Rs 43,176 crore or 63 per cent. While much of this was due to the fall in commodity prices, Agarwal also paid the price for an ill-advised restructuring plan, aborted immediately after a few institutional investors opposed it for favouring promoters.

Of the 44 top losers whose net worth is down over 80 per cent, 25 are from realty related sectors. Billionaires in commodities, oil, agriculture and metals lost over 70 per cent each. The cement and steel billionaires lost heavily on government efforts to control rising inflation.

Defying the trend
A few billionaires added to their wealth in an otherwise gloomy year for wealth-makers. Nitin Sandesara, the CMD of Sterling Biotech, increased his wealth by Rs 806 crore, or 28.54 per cent, by creating a globally-competitive gelatine business. In the mid-1990s, the Sandesaras exited the traditional tea-trading business to set up a plant to manufacture gelatine at Karakhadi near Vadodara. They were looking to enter a business that would be globally competitive, high-tech and high-growth with strong entry barriers. In less than a decade, Sterling has emerged as the largest gelatin manufacturer in Asia, with key customers in the US.

Sterling’s advantage is access to cheaper raw material (bovine bones, which it sources 30-60 per cent cheaper than plants in the West) and labour, helping it emerge among the lowest cost producers.

The other big surprise was Saurabh Tayal, chairman of KSL and Industries, who gained Rs 5,442 crore, or 96 per cent in wealth. A third-generation scion of an old textile family, Tayal has transformed the 50-year-old textile business and forayed into real estate — the group is developing properties in several locations. While many textile exporters are grappling with the US scrapping of the textile quota regime, KSL’s revenue and net profits have grown 36 per cent and 116 per cent respectively year-on-year over three years till March 2007, helping it emerge among the top five companies in the mid-cap space (Rs 100-500 crore) in a study last year. Tayal’s growth was fuelled by acquisitions as KSL bought ailing textile rivals including Surat Co-operative Mills, Kamleshwar Textile Mills, Empress Textile Mills and Deccan Co-operative Mills. These gave KSL the opportunity to develop land banks, and the group is developing 15 realty projects: townships, hotels, commercial complexes, malls, multiplexes, and warehouses across Maharashtra, Punjab and Dadra and Nagar Haveli.

Among other billionaires who defied a falling market and increased their wealth are Lupin Laboratories’ D B Gupta, who added Rs 58 crore, or 2 per cent, to his wealth in the 12 months trailing January 2009; pharma billionaires Dilip Shanghvi of Sun Pharma and Y K Hamied of Cipla managed to retain their wealth. The biggest gainers were brothers Malvinder and Shivinder Singh, who sold their 34.86 per cent stake in Ranbaxy Laboratories to Japan’s Daiichi Sankyo at a hefty premium to its current stock price. They added Rs 1,572 crore to their combined wealth, taking their net worth to Rs 10,611 crore. Had they not sold out, they would have been poorer by Rs 4,654 crore.

Brijmohan Lall Munjal, patriarch of the Hero Group, managed to hold on to his wealth on the basis of a good show by the flagship Hero Honda, which consolidated its share of the two-wheelers market at the cost of rivals like Bajaj and TVS Motors. A few others who defied the odds included Chandir Gidwani and Khushroo P Byramjee of Centrul Capital, Sudhir Shankar Moravekar of Panoramic Universal (hotels), Prem Adip of MVL (constructions) and Harish Belwal of Intra Infotech. These billionaires had the highest increase in wealth in percentage terms.

Of India’s 367 billionaires, only 17 are new entrants, including 14 who took their companies public. Sixty-eight billionaires in 2008 were also dollar billionaires (rupee:dollar conversion rate of Rs 39.37 for January 2008), but in 2009, only 20 figure as dollar billionaires (rupee:dollar exchange rate of Rs 48.88 for January 2009).

Prominent among those who’ve ceased to be dollar billionaires are Kalanithi Maran of Sun TV, Jaiprakash Gaur of Jaiprakash Associates, Glenn Saldhanha of Glenmark Pharma, Brijmohan Lall Munjal of Hero Honda, Subhash Chandra of Zee Entertainment, and Adi Godrej of Godrej group.

Despite the sharp corrections in their stocks, the realty, infrastructure and construction sector produced 46 billionaires, followed by capital goods (including engineering) and pharmaceuticals (32 each), IT (31), diversified (27), metals (25), media and textiles (21 each). Automobiles, financial services, FMCG and cement sectors together added 65 billionaires, while the remaining 104 billionaires were from sectors such as services, retail, sugar, telecom, trading, and gems and jewellery.

Falling out of favour
The fall in the Sensex saw 207 billionaires drop out of the 2009 Billionaire Club. Among the well-known were IT entrepreneurs Atul K Nishar (Hexaware), M V Srinivas (Northgate Technologies) and K Padmanabhan (Teledatata Informatics), and Hyderabad-based infrastructure developers like Nama Nageswar Rao and Nama Seethaiah of Madhucon Projects, and D S Chandra Mohan Reddy of Prajay Realty developers like Lalit Gandhi and Naina Shah of Lok Housing, and Deepak Kulkarni of DS Kulkarni & Brothers, who became billionaires on the back of their IPOs, could not sustain their position. Big investors like Vinod Khosla (Praj Industries), Ranjitsinh A Parmar (Suzlon Energy), Vivek Mundra (Aban Offshore), Bharat K Sheth (Financial Technologies — though he remains MD of Great Eastern Shipping), GR Gopinath (Kingfisher Airlines) and Vineet Nayyar also went off the list as the value of their investments fell sharply.

The poster boys of media and entertainment who exited from the list included Ajay Bijli of PVR, Subhash Ghai of Mukta Arts, Nirmal N Kotecha and P S Saminatha of Pyramid Saimira, Anuradha Shukla of BAG Films & Media, Rasesh B Kanakia of Cinemax India, and Raajhendhran of Raj TV. Key pharmaceutical players excluded from The Billionaire Club are the Sarabhai family of Ambalal Sarabhai Enterprises, K R Ravishankar and Arun Kumar of Strides Arcolab, and S Devendra of Sashun Chemicals.

Casualties in auto components included Jag Mohan Kapur of Sona Kayo Steering, Arvind Kapur of Rico Auto, and D K Jain of Lumax. Several billionaires in the metals space, especially of midcap companies, also fell by the wayside after riding the commodity cycle for two years.