India's biggest wealth destroyers, Reliance tops

#1
While TCS cheered investors becoming India’s biggest wealth creator, Reliance which was a darling of the markets turned out to be a damp squib.

Shocking investors Reliance, which was the biggest wealth creator for five consecutive years till as recent as 2011, became the biggest wealth destroyer during the period 2008-13, says a study by Motilal Oswal.

The 2008-13 period saw unprecedented wealth destruction of over Rs 17 lakh crore, almost entirely wiping out the total wealth created by top 100 companies.

Reliance Industries

Rank: 1

Wealth destroyed: Rs 11,28,700 crore (Rs 11,287 billion)

Share of wealth destroyed: 7%

Price (CAGR %): -7

The irony is that the biggest wealth destroyer during this period Reliance Industries was the biggest wealth creator five times consecutive times from 2007 to 2011.

Reliance Communication

Rank: 2

Wealth destroyed: Rs 92,100 crore (Rs 921 billion)

Share of wealth destroyed: 5%

Price (CAGR %): -36

One-third of the wealth destroyed can be attributed to three broad ownership groups - Reliance (Mukesh Ambani), Reliance (Anil Ambani) and PSUs.

MMTC

Rank: 2

Wealth destroyed: Rs 89,100 crore (Rs 891 billion)

Share of wealth destroyed: 5%

Price (CAGR %):-29

The stock market's perception of ineffective management (including capital mis-allocation, consistent failure to deliver on guidance, low dividend payout etc) is a major source of wealth destruction.

NMDC

Rank: 2

Wealth destroyed: Rs 82,200 crore (Rs 822 billion)

Share of wealth destroyed: 5%

Price (CAGR %): -17

When the market is disappointed, it does not spare even those stocks which were its darlings till recently, the study explains.

Metals/mining sector lost the worst loser with 124 companies among wealth destroyers.

DLF

Rank: 2

Wealth destroyed: Rs 70,300 crore (Rs 703 billion)

Share of wealth destroyed: 4%

Price (CAGR %):-18

The top ten wealth destroyers saw an erosion of Rs 7,07,700 crore (Rs 7,077 billion).

Reliance Power

Rank: 2

Wealth destroyed: Rs 61,900 crore (Rs 619 billion)

Share of wealth destroyed: 4

Price (CAGR %):-21

Besides pace of earnings growth, markets also value longevity of earnings.

Thus, companies with above-average earnings power are likely to outperform markets even if their earnings growth is in line with average, says the study.

BHEL

Rank: 2

Wealth destroyed: Rs 57,400 crore (Rs 574 billion)

Share of wealth destroyed: 3

Price (CAGR %): -16

PSUs have lost out on their erstwhile wealth creating presence in sectors like utilities, metals & mining and capital goods.

SAIL

Rank: 2

Wealth destroyed: Rs 50,600 crore (Rs 506 billion)

Share of wealth destroyed: 3

Price (CAGR %):-20

Unlike younger companies, smaller companies (based on market cap of base year) seem to have an edge in faster wealth creation.

Bharti Airtel

Rank: 2

Wealth destroyed: Rs 46,000 crore (Rs 460 billion)

Share of wealth destroyed: 3%

Price (CAGR %): -7

Bharti Airtel is the only telecommunications company among the top wealth destroyers.

NTPC

Rank: 2

Wealth destroyed: Rs 45,400 crore (Rs 454 billion)

Share of wealth destroyed: 3%

Price (CAGR %): -6

The number of PSUs in the top 100 Wealth Creators is at an all-time low of only 11.
 

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