Software major Tata Consultancy Services (TCS) has emerged as the biggest wealth creator over the past five years, while Reliance Industries and RCom top the list of companies where investors lost the most in terms of market capitalisation, says a study.
A wealth creation study conducted by financial services company Motilal Oswal analysed wealth created by 100 companies between 2008 and 2013 in terms of their market capitalisation, after adjusting for mergers, demergers, fresh issuance of capital and buy back of shares.
The list of the "top 10 wealth destroyers" during 2008-13 are Reliance Industries, Reliance Communications, MMTC, NMDC, DLF, Reliance Power, BHEL, SAIL, Bharti Airtel and NTPC, the study said.
TCS pushed ITC to the second slot to occupy the top position. The tobacco major was the biggest wealth creator in the last year's report calculated for 2007-12, Motilal Oswal's 18th annual wealth creation study said.
Others in the 'Top 10' list of biggest wealth creators are HDFC Bank, Infosys, Sun Pharma, ONGC, HDFC, Tata Motors, HUL and Wipro. According to the study, seven out of the top 10 biggest wealth creators during the period are non-cyclicals, two consumer goods companies and five are global non-cyclicals.
TTK Prestige retained its place as the fastest wealth creator again during the period, as its stock price multiplied 28 times, translating into annualised return of 95 per cent, the study said.
Nine of the top 10 fastest wealth creators had a market cap of under Rs 5,000 crore in 2008 and seven of the top 10 were below 15 times their price earnings ratio in 2008.
"Mid and small-cap companies with the right business models, able management and bought at reasonable valuations, delivered handsome returns irrespective of economic and stock market conditions," Motilal Oswal Joint Managing Director Ramdeo Agrawal said. Asian Paints has emerged as the most consistent wealth creators having appeared in all past 10 wealth creation studies.
The company had the highest price CAGR of 36 per cent between 2004 and 2013, the study said. Sector wise, consumer and retail have emerged as the largest wealth creating sectors for the first time since 1999, followed by the technology sector.
"Going forward, we expect technology to emerge as the largest wealth creating sector, as unlike the consumer goods sector, tech valuations are reasonable relative to earnings growth and return of equity," Agrawal said.
State-owned companies have become marginalised in wealth creation, with their share collapsing from 51 per cent in 2005 to 9 per cent in 2013, the study said. A strong corporate parent in a non-cyclical business significantly increases the profitability, Agrawal said.
The study noted that endurance of the value creator is mainly threatened by disruptive innovation or competition, major regulatory changes and capital mis-allocation. Agarwal believes that the worst is over for equities and the risk-reward equation is favourable for long-term investing.
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