 "RIL, Lloyds Metals and Capri Global shine, says Motilal Oswal report")
Reliance Industries (RIL), Lloyds Metals & Energy and Capri Global Capital have emerged as the biggest, fastest, and most consistent wealth creators, respectively, from 2018 to 2023, according to a study conducted by Motilal Oswal.
Mukesh Ambani-led RIL created a wealth of Rs 9.6 trillion in the past five years — most in absolute terms, followed by Tata Group flagship Tata Consultancy Services (Rs 6.8 trillion) and private sector lender ICICI Bank (Rs 4.2 trillion).
Adani Enterprises is the top ‘all-round’ wealth creator, as per the 28th Wealth Creation study, which notes that technology emerged as the largest wealth-creating sector in the five years, followed by consumer and financial services. Regarding percentage growth, Lloyds Metals was the top performer, growing at an annualised rate of 79 per cent in the past five years. Adani Group flagship was a close second with a CAGR growth of 78 per cent followed by Tube Investments (63 per cent) and Linde India (56 per cent).
As far as consistent growth is concerned, companies that shone were Capri Global (CAGR growth of 50 per cent), Varun Beverages (50 per cent), Grindwell Norton (30 per cent) and ICICI Bank (26 per cent). The stock performance of each of them was better than the peer set in each of the last five years, according to the study piloted by Raamdeo Agrawal, Chairman of Motilal Oswal Group.
During the 2018-23 period, the top 100 wealth creators of India Inc created a wealth of Rs 70.5 trillion. Their market value grew at a CAGR of 21 per cent, higher than that of the Sensex, which has delivered annualised returns of 12 per cent. The performance of public sector undertakings (PSUs) showed a remarkable turnaround during 2018-23 as compared to the previous two wealth creation studies.
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“Two key factors have driven PSU wealth creation – turnaround by two banks (State Bank of India and Bank of Maharashtra) and growth in the defense sector (Bharat Dynamics, Bharat Electronics and Hindustan Aeronautics),” said Motilal Oswal in a note.
“There is a clear turnaround in the fortunes of PSUs, to some extent by better management. In some measure the outlook is also changing. As private sector companies have been taken to a different height altogether, it is time for PSUs to be rerated from the depths of pessimism,” said Agrawal.
He said the market at current juncture were fairly valued as far as market cap-to-GDP ratio was concerned.
"A lot of pessimism is already done, and a lot of optimism is already captured. Market at 1.2 times GDP, is fairly valued. The only saviour is the earnings growth which is at about 15-17 per cent,” he said at a panel discussion around the latest wealth study.
The total ‘wealth destroyed’ during 2018-23 stood at Rs 17 trillion. In other words, these companies saw an erosion in their market value. The study showed that six of the top 10 wealth-destroying companies are from the financial sector (including insurance).
Agrawal advocated that the performance of the companies should not be measured in terms of accounting profit but by economic profit. "The only deficiency in the accounting profit measure is that how much equity you have used to earn that profit is not being equalised or charged. Economic profit is the accounting profit minus the equity charge. Somebody uses little equity while someone would have a higher equity charge.