Reliance Industries has emerged as the country’s largest wealth creator for the third time in a row, according to the 14th Motilal Oswal Wealth Creation Study.
It created Rs 1,514 billion (Rs 1.5 lakh crore) worth of wealth, 15.6 per cent of the total created, in 2008-09. Wealth creation has been calculated in the latest study as a change in the market cap of companies between 2003 and 2009, duly adjusted for corporate events such as mergers, demergers, fresh issuance of capital, buyback, etc.
Unitech has been the fastest wealth creator, for the second time in a row. Its stock price CAGR ( compounded annual growth rate) is a staggering 122 per cent. Five companies — HDFC, Sun Pharma, Reliance Inds, Hero Honda and Infosys — have remained among the top 100 wealth creators in the past 10 years. NMDC has the unique distinction of featuring in both the biggest and the fastest wealth creators’ list.
Among sectors, eight of the top 10 most consistent wealth creators are consumer-facing businesses, with strong franchise. Oil & gas continues to be the largest wealth creating sector. Telecom’s rising share of wealth created is attributed to a superior CAGR in profits after tax (PAT), of 62 per cent over the past five years. On the other hand, the comparative figure for FMCG companies is a muted 14 per cent.
Comparing the performance of the top 100 wealth creating companies (Wealthex) over the entire period, the Wealthex outperformed the Sensex by 83 per cent. Wealthex earnings showed a CAGR of 24.2 per cent, compared to 18.8 per cent for the Sensex. The Wealthex P/E ratio was 16.3, lower than 16.8 for the Sensex.
According to the study, the criteria for multi-bagger stocks is: these companies should have a P/E of less than 10 times, a price to book value of less than one, a price to sales ratio of one or less and a payback ratio of one or less. As many as 74 of the top 100 wealth creating companies had a base market cap of less than Rs 50 billion in 2004.
