India Inc’s top 100 create ₹138 lakh cr in 5 yrs; biggest wealth creators revealed

The top 100 wealth creators of India Inc. created all-time high wealth of ₹138 lakh crore during 2019-24, and the pace of wealth creation at 26% CAGR was the second highest in the last 10 study periods, higher than the BSE Sensex return of 14%, according to Motilal Oswal's latest 29th annual wealth creation study for 2019-2024.

For the past 10 successive study periods, market benchmark indices have delivered "muted returns", ranging from 5% to 15%. Still, the top wealth creators have maintained their track record of 10-15% outperformance over the benchmark, which the brokerage major says, underscores its pet take on market strategy, “Forget markets, think stocks.”

Mukesh Ambani-led Reliance Industries has emerged as the "biggest wealth creator" for the 6th time in a row over 2019-24. "This takes Reliance’s overall No.1 tally to 11 in the last 17 five-year study periods," the report says. TCS and Infosys also remain among the top 10 wealth creators continuously.

During 2019-24, the share of the top 10 in "total wealth created" is 37%, the lowest in the last 20 years, suggesting that wealth creation in the said period was widespread. Further evidence of this is the strong performance of mid and small-cap indices and stocks. During 2019-24, the Nifty Midcap 100 CAGR is a robust 21% and the Nifty Small Cap 100 CAGR is a high 18%, according to the study.

Conventional investing is all about buying into healthy companies. Investing in troubled companies – or potential turnarounds – is a contrarian approach. The biggest risk in this approach is the mortality of the companies invested in i.e. permanent capital loss.

Among the top wealth creators, Adani Green has emerged as the fastest one at a CAGR of 118% in the past five years. Two more Adani group companies that have also made it to the list of top 10 "fastest wealth creators" are Adani Enterprises and Adani Power.

"Rs 1 million invested in 2019 in these top 10 companies would be worth INR 17.5 million in 2024, a return CAGR of 77% vi/s 14% for Nifty 50," says the study.

Among companies of different sizes, mid and small-cap stocks overheated, with nine of the top 10 fastest wealth creators seeing massive P/E rerating. Further, 5 of the top 10 had P/E over 100x. "Though partly justified by robust earnings growth, this is still a case of too much money chasing too few stocks. The current P/E of Nifty Midcap 100 is 44x whereas that of the Nifty Small Cap 100 is 36x. This merits caution."

Among the most consistent companies, Linde India emerged as the winner as the stock outperformed in each of the last 5 years. Where the number of years is the same, the stock price CAGR decides the rank. It has outperformed the Nifty Total Return Index in all the last 5 years and has the highest price CAGR of 68%. "Consistent Wealth Creation is a challenge – only 6 out of 100 have outperformed in each of the 5 years," says the study.

Adani Enterprises is also the best all-round wealth creator for the third time in a row, with two other Adani group companies – Adani Green and Adani Power – also featuring in the top 10 all-round wealth creators.

"Six out of the top 10 All-round Wealth Creators are also among the top 10 Fastest Wealth Creators. Five out of the top 10 All-round Wealth Creators are also among the top 10 Consistent Wealth Creators. Thus, speed and consistency are the key determinants of all-around wealth Creation rather than size," the study adds.

For the past several years, Sensex earnings growth has been muted. "In the markets, especially over the long term, G = R i.e. Growth in earnings = Return on the stock. Given this, a portfolio of stocks with even a slightly superior earnings profile vis-à-vis the Sensex should consistently outperform it."

Among sectors, financials has emerged as the largest wealth-creating sector, though it has lost a significant share of the wealth created – 16% v/s 34% five years ago. The new kids on the block are utilities, capital goods, pharma or healthcare and telecom, as per the report.

Typically considered a laggard sector, utilities have posted a strong performance to emerge as the third largest wealth-creating sector, boosted by the three Adani Group companies – Adani Green, Adani Power, Adani Energy Solution, and the PSU pack including NTPC, NHPC, SJVN and Power Grid.

The PSUs, as per the study, saw a significant improvement over the last 3 studies, with 20 PSUs accounting for 17% of the wealth created. The key factors driving PSU wealth creation are the profit of 9 financial companies rising 19x over 5 years; and the profit of Coal India rising 4x over 5 years. Two sectors – financials and utilities – account for 70% of wealth created by PSUs, the study adds.