Reliance Industries was the largest wealth creator in India in the past five years – taking the top position for the third time in a row, according to a report by Motilal Oswal Financial Services.
The financial sector reclaimed its position as the No. 1 wealth creator while public sector undertakings recorded their worst performance in 2016-21, the Motilal Oswal 26th Annual Wealth Creation Study showed. The financial sector was both the top wealth creating and top wealth destroying sector.
Equity was the biggest wealth creating asset class of the year as stock markets the world over created history by reaching record highs. The market-capitalisation of most companies and benchmark indices skyrocketed, first-time investors got attracted to the stock markets, and unprecedented liquidity was available in the market.
Adani Transmission emerged as the fastest wealth creator and Adani Enterprises the best all-round wealth creator.
Motilal Oswal found that the Top 100 companies in India’s equity markets created Rs 71 lakh crore in wealth during the five years from 2016 to 2021. This was the highest wealth created in the past 26 five-year periods. The pace of wealth creation was also robust at a compound annual growth rate of 24 percent vis-à-vis 14 percent for the BSE Sensex.
The previous best period in terms of wealth creation was 2014-19, when the markets generated Rs 49 lakh crore of wealth for investors. The five-year period of 2015-20 was impacted by the pandemic and created Rs 21 lakh crore of investor wealth.
The Motilal Oswal 26th Annual Wealth Creation Study, 2021, was released on December 15. The firm’s wealth creation study was commissioned by Raamdeo Agrawal, chairman of Motilal Oswal Group.
Reliance rules the roost
Reliance Industries, the largest Indian company by market capitalisation, smashed all records to emerge as the largest wealth creator for the third time in a row. It added Rs 9.7 lakh crore to investor wealth, beating its own previous record of Rs 5.6 lakh crore during 2014-19. The company accounted for 13.6 percent of the total wealth created during the period.
“Reliance’s re-emergence as the biggest wealth creator reflects the power of phygital – physical plus digital,” Motilal Oswal said in the report. “Its oil-to-chemicals and retail businesses are strongly rooted in the physical whereas the telecom business is the digital dimension. Going forward, expect more and more phygital and digital companies to spearhead wealth creation.”
IT giant Tata Consulting Services came in second by creating wealth of Rs 7.3 lakh crore, followed by HDFC Bank, which added Rs 5.2 lakh crore, Hindustan Unilever Rs 3.4 lakh crore and Infosys Rs 3.3 lakh crore.
Bajaj Finance, ICICI Bank, HDFC, Kotak Mahindra Bank and HCL Technologies made up the remaining top 10 wealth creators for 2016-21.
Reliance also made its entry into the list of top 10 fastest wealth creators, an area which is ruled predominantly by mid and small cap companies.
Adani Group – fastest in the race
The study found Adani Transmission was the fastest wealth creator with a price CAGR of 93 percent during 2016-21. Another Adani Group company – Adani Enterprises – was ranked the third fastest wealth creator with a price CAGR of 86 percent, behind Deepak Nitrite, which had a price CAGR of 90 percent.
Tanla Platforms and Ruchi Soya were the other two companies in the top five fastest wealth creators.
A sum of Rs 10 lakh invested equally in 2016 among the top 10 fastest wealth creators would have grown to Rs 170 lakh in 2021, which is a CAGR of 77 percent compared with 14 percent for the Sensex, according to the study.
“For high wealth creation, it is essential to pick small-to-mid companies with robust earnings growth prospects trading at reasonable valuations,” the study highlighted.
Adani Enterprises also emerged as the most consistent wealth creator in the past five years with the highest price CAGR of 86 percent.
Sectoral Participation
The financial sector emerged as the biggest wealth creating sector during 2016-21 by generating Rs 17.4 lakh crore. The sector lost its numero uno position last year to consumer & retail, which came in at third position this year with Rs 12.5 lakh crore. Technology occupied the second position by adding Rs 15.2 lakh crore.
Oil & gas and metals & mining made up the remaining list of top five biggest wealth creating sectors.
Led by rapid adoption of cloud, transformation and digitisation, the technology sector is witnessing robust demand and a strong deal pipeline, which will lead to high growth for the sector.
“It is the only sector which may potentially challenge the dominance of the financial sector in the next wealth creation study period, 2017-2022,” Motilal Oswal said.
PSUs lose the plot
Public sector undertakings (PSUs) came up with their worst performance in the wealth creation process in 2016-21. Only Gujarat Gas and Indraprastha Gas could make it to the top 100 wealth creators, generating less than 1 percent of the total wealth.
The previous period of 2015-20, there were seven PSUs in the top 100, with 3 percent of the total wealth created. The study also found out that there were five PSUs in the top 10 wealth destroying companies. Private banks were the top wealth creators while public sector banks made up the top wealth destroyers.
Digital – the way to go
The wealth creation report highlighted that digital will be the mantra of the future.
“Globally, value is migrating from atoms (businesses dealing in physical matter) to bits (businesses that are digital in nature),” the report said. “This has already played out in a big way in the US.”
The digital ecosystem in India is right for atoms-to-bits to play out here, it said.
According to the report, bits deal in intangible assets, have very low cost of replicating their products, and benefit from network effects.
“As a result, bits can scale up very rapidly compared to their atom counterparts,” the report added.
Bits have high initial losses and their success depends on hyper growth, operational scalability, large opportunity size, favourable unit economics, wide distribution and network effects.
Disclaimer: Moneycontrol is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.
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