Investors snub sectors with high policy arbitrage, reveals rich list

Written by Rishi Raj | New Delhi | Updated: Mar 23 2011, 09:39am hrs
Sectors having policy arbitrage continue to suffer at the hands of investors. This is best illustrated by the changes in the ranking of the countrys top 10 business groups and their promoters wealth in terms of their holdings in their respective group companies over a period of the last one year.

Between March 2, 2010, and March 1, 2011, two groups and their promoters saw decline in their ranks in terms of market cap and their personal wealth ADAGs market cap declined from R120,080 crore to R80,000 crore seeing Anil Ambanis rank among the top 10 richest businessmen declining from number 7 in March 2010 to number 8 in March 2011. The other loser was Anil Agarwal of the Vedanta/Sterlite group. Real estate firm DLF lost in terms of its market cap but despite this promoter KP Singh held on to his number 6 position. His wealth though declined from R39,010 crore to R29,633 crore. Barring these, the market cap of the other seven business houses increased thereby increasing the personal wealth of their promoters.

Telecom, power, real estate and metals and mining are the sectors where policy arbitrage is high as witnessed in the last one year and the groups mentioned above have significant presence in them.

So if Anil Ambani's rank among the top 10 richest Indian businessmen suffered by one notch, Vedanta's Anil Agarwal who ranked as number 3 with a personal wealth of R67,125 crore in March 2010 went down to number 5 in 2011 with his worth being at R33,922 crore. Similarly, DLFs market cap of R49,606 crore in March 2010 declined to R37,685 crore in March 2011, however promoter KP Singh held on to his number 6 position.

Those who gained are Sunil Mittal of Bharti Group and Kumarmangalam Birla of the AV Birla group. While Mittal has moved up from number 4 in March 2010 to number 3 in March 2011, Birla has moved to number 7 from 8 a year earlier. Mittal wrested the number 3 position earlier held by Agarwal while Birla edged Anil Ambani.

The other rankings are in order. Mukesh Ambani continues to be the richest Indian businessman with his personal wealth at R145,220 crore as on March 1 2011, up from R144,559 crore on March 2, 2010 (March 1, 2010, was Holi so the market was closed). Azim Premji of Wipro ranks second, followed by Sunil Mittal (see chart).

Though the ones enjoying policy arbitrage have lost out the pattern is not entirely even. Though telecom has emerged as the single biggest controversial sector with the 2G spectrum scam and the Supreme Court ordering a probe into all spectrum allocation since 2001, it is only Anil Amabni, who's flagship firm is Reliance Communications, who has lost. Both Mittal (Bharti Airtel) and Birla (Idea Cellular) have moved a notch upwards.

Similarly, though the metals and mining sector is seen as one that investors would like to keep out of, Agarwal has lost out but Birla, who has significant presence there, has not.

Calendar year 2010 saw a similar pattern when the benchmark BSE Sensex ended up 17.43% but major real estate, infrastructure, and metal firms underperformed losing between 13 to 48% during the year.

In 2010, scrips of major real estate firms like DLF, Unitech, HDIL and IndiaBulls declined by 20%, 21%, 48% and 41%, respectively, with the realty index down 25.92%, hugely under-performing the Sensex. Agarwal's Sterlite and Sesa Goa had also ended the year down 13% and 21%, respectively. This was when the BSE's metal index was marginally up 1.13%. In that year in the telecom sector while Bharti gave a return of 6% and Idea Cellular of 22%, Reliance Communications was down 20%.