TCS, Infosys and HDFC Bank remain among the top 5 Wealth Creators.
Rs 1 million invested in 2017 in these top 10 companies equally would be worth Rs 21 million in 2022, a return CAGR of 84% v/s 15% for the BSE Sensex.
Seven of the top 10 Fastest Wealth Creators had market cap of under Rs 30 billion in 2017. Further, most of them were reasonably valued then, especially relative to their growth prospects. “Thus, the data confirms the obvious – for high Wealth Creation, pick small-to-mid companies with robust earnings growth prospects and trading at reasonable valuations,” said Motilal Oswal.
Over 2017-22, Adani Enterprises has emerged as the Most Consistent Wealth Creator. It has outperformed the BSE Sensex in all the last 5 years, and has the highest price CAGR of 97%.
Motilal Oswal define Consistent Wealth Creators based on the number of years the stock has outperformed in each of the last 5 years. Where the number of years is the same, the stock price CAGR decides the rank.
Consistent Wealth Creation is a challenge – only 13 of the 100 Wealth Creators have outperformed in each of the 5 years.
Adani Enterprises and Adani Transmission have topped the ‘all-round’ ranking in the Motilal Oswal Annual Wealth Creation Study 2022, while the biggest wealth creator in absolute terms is RIL, with an increase in market capitalisation (m-cap) of Rs 13 trillion between 2017 and 2022.
Both the Adani companies have seen their stock price nearly double each year during the five-year period between 2017 and 2022.
All-round Wealth Creators are based on the summation of ranks, under each of the 3 categories – Biggest, Fastest and Consistent.
The Technology sector has emerged as the largest Wealth Creator after a gap of 8 years. The sector has also gained significant share of Wealth Creation – 27% of total Wealth Created v/s 10%, 5 years ago.
The new kid on the block is Chemicals/Fertilisers with 3% share of the Wealth Created.
The biggest losers are rate sensitives – Financials and Auto.
“The Technology sector saw a great run in the last 5 years on the back of huge orders led by digitalization. However, given global slowdown, IT spend has moderated. Further, sector P/Es skyrocketed in FY22, which have since corrected. Meanwhile, the Financial sector is coming out of Covid despair, and is likely to dominate Wealth Creation in the foreseeable future,” noted Motilal Oswal.
Wealth Creation by PSUs (public sector undertakings) over 2017-22 is the worst ever to date. The only Wealth Creating PSU is Gujarat Gas. Wealth Created by the company is a mere 0.3% of the total Wealth Created.
Wealth Destroyers: The total Wealth Destroyed during 2017-22 is Rs 14 lakh crore, 16% of the total Wealth created by top 100 companies. This is sharply below the previous Covid-hit study period 2015-20. Four of the top 10 Wealth Destroying companies are PSUs.
Biggest wealth destroyers for the period are Vodafone Idea (Rs 1.2 trillion m-cap), Indian Oil (Rs 71,300 crore) and Coal India (Rs 67,900 crore).