By Siddhant Mishra
Reliance Industries and Adani Enterprises were the top wealth creators from 2017 to 2022, according to Motilal Oswal’s Annual Wealth Creation Study 2022. The report said that the technology sector was the largest wealth-generating sector during the five-year period under review.
The study by MOFS, titled ‘Consistents & Volatiles: The Two Dimensions of Wealth Creation’, categorises companies into two classes — the ‘consistents’ that continuously outperform, and ‘volatiles’ that continuously underperform.
Consistents are defined as firms whose annual profit after tax (PAT) does not fall by over 10% more than thrice over a 15-year period (twice if the period is 10 years), with no fall in PAT being greater than 50%. The terminal year’s PAT should not be lower than the initial year’s PAT. Others fall into the volatile category.
For the fourth consecutive time, RIL emerged the largest generator over 2017-22, thus taking the company’s overall No.1 tally to nine in the last 16 five-year study periods.
TCS, Infosys and HDFC Bank are other firms that feature in the top five.
The study defines wealth creation as the change in market cap between 2017 and 2022, duly adjusted for corporate events such as mergers, de-mergers, fresh issuance of capital, buyback, etc.
Analysing the top 100 entities creating wealth, the report said that from 2017 to 22, the top 100 wealth creators of India Inc created wealth of `92.2 trillion, the highest ever by far.
Two Adani group firms stood out, as Adani Transmission emerged the fastest wealth creator with a 2017-22 price CAGR of 106%.
The other was Adani Enterprises, which was the most consistent creator for the second successive year, outperforming the BSE Sensex for all five years, having the highest price CAGR of 97%.
Consistent wealth creators have been defined based on the number of years the stock has outperformed in each of the last five years. In case the number of years is the same, the CAGR shown by the stock price decides the rank.
Adani Enterprises also emerged the best all-round wealth creator, followed by Adani Transmission, based on the summation of ranks under each of the three categories — Biggest, Fastest and Consistent.
As regards public sector companies, wealth creation over the five-year study period from 2017-22 was the worst ever to date; Gujarat Gas was the only wealth-creating PSU. Wealth created by the company was a mere 0.3% of the total.
At the same time, the total wealth destroyed during 2017-22 was Rs 14 trillion, which was 16% of the total wealth created by top 100 companies. This was sharply below the previous Covid-hit study period 2015-20. Four of the top 10 wealth-destroying companies were PSUs.