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BW Businessworld

Of Rich Rewards & Returns

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For the majority of India's ultra rich, financial year 2010-11 was neither extremely good nor particularly bad. The BSE Sensitive Index (BSE Sensex) moved from 17692 points at the close of 1 April 2010 to 19445 points at the close of 31 March 2011. The market had not gone into a freefall of the kind that was witnessed in 2008-09. But neither did it rise as sharply as it had in the previous financial year. India's richest man, Mukesh Ambani of Reliance Industries, saw his notional wealth drop by some Rs 4,000-odd crore (just under $1 billion) despite the rise in the overall market. His younger brother Anil Ambani saw his wealth erode notionally by some Rs 13,700 crore or a shade over $3 billion.

Neither man was probably really affected. The elder Ambani and his family hold a stake worth roughly $34 billion in their flagship Reliance Industries (RIL). Anil Ambani's stakes in his group companies are worth approximately $13.7 billion even after the drop. With that sort of wealth, a drop or rise of a few thousand crores does not materially affect you.

The big gainer last year was Gautam Adani and his family. Notionally, their wealth jumped by over 50 per cent to reach Rs 96,192 crore or approximately $21.3 billion. For most of the other dollar billionaires, the news was largely good. Azim Premji, Sunil Mittal, Kumar Mangalam Birla, the Bajaj family, the Munjals, the Godrejs, the Sanghvis, Shiv Nadar, Uday Kotak and Vijay Mallya saw their wealth increase rapidly. Savitri Jindal and her sons, Anil Agarwal, K.P. Singh, Jaiprakash Gaur and G.M. Rao saw their wealth coming down. (The Jindals had been big gainers the previous year, with their wealth jumping by over 300 per cent, thanks to the listing of one new company in the group.)

There were no huge surprises. Sentiment was down in realty, which saw most property billionaires lose wealth. But information technology czars saw a sharp rise in their wealth.
The year saw an addition of a mere 30 new billionaires (rupee billionaires) compared with the nearly 200 new billionaires the previous year had created. All in all, it was not such a bad year for the rich even though many a scandal rocked the country.

Inheritors Vs EntrepreneursThe Businessworld Super Rich list shows that first-generation entrepreneurs largely dominate. In the dollar billionaire list, though, there are a few old families that have managed to retain a prominent position in the rich list. And in some cases, there are first-generation inheritors who have multiplied the family wealth manifold through their own entrepreneurial drive.



The Ambani brothers are first generation inheritors, though both brothers can claim to have significantly added to the wealth they got from their father. Azim Premji and Vijay Mallya are both inheritors and also entrepreneurs in the true sense. Premji inherited a small FMCG company that he turned into an IT services powerhouse. Mallya was given a liquor empire but grew it into a world-class enterprise, and added an airline (though a loss-making one), a realty company and many other companies to his original inheritance. Sunil Mittal and his brothers were comfortably off — their father had a relatively small business. But the rise and rise of the Mittals was largely accomplished in the current generation. K.P. Singh turned the relatively small construction business of his father-in-law to the powerhouse called DLF. Similarly, the Jindal brothers have built an amazing empire from the companies their late father had initiated. The Singh brothers — Malvinder and Shivinder — have actually sold the flagship they inherited from their father, while building another empire on their own. 
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Meanwhile, Shiv Nadar, Jaiprakash Gaur, Anil Agarwal, Gautam Adani and G.M. Rao are all first-generation entrepreneurs. Kumar Mangalam Birla represents old wealth, as do the Mahindras, the Bajajs, the Godrej family and to an extent the Kotak family. (Uday Kotak's father sowed the seeds of the financial empire, which he steers now.)

Similarly, most of the rupee billionaires are self-made businessmen (and women). But there is a sprinkling of names that represents old wealth. In many cases, these families have actually come down in terms of the status they enjoy in the business world, though they are still rich. For example, the Shriram family, the Nandas, the Khaitans or the Modis or the many splinters of the Birla family are no longer as prominent as they were 30 years ago. On the other hand, you see numerous billionaires who have come to prominence in the past couple of decades — from G.V.K. Reddy to Kishore Biyani and from Naresh Goyal to Raghav Bahl.

Public Companies Vs Private WealthThe problem with creating any list of the super-rich is that it never captures the full wealth of listed companies. The other assets — holdings in private but cash-rich companies, values of houses, cars, etc. — can't be measured. 

Take Shapoorji Pallonji, for example. He is worth a mere Rs 390 crore, if you go by his holdings in the listed companies — Forbes & Co. and Gokak Textiles. On the other hand, it is impossible to estimate the greater part of his wealth — from his privately-held construction business or his shares in Tata Sons.

Again, no rich list in India captures the wealth accumulated by many of our politicians. Similarly, the wealth of our actors and our most successful sportspeople can only be guessed.

The Conservatives Vs The High RollersAs in any other segment of the population, the spending habits and the personal styles of India's super rich can show huge contrasts. Mukesh Ambani built a 27-storey building as his residence, and bought an Airbus corporate jet for wife Nita. Vijay Mallya is famous for his parties, his yacht and his cars. Azim Premji is the other extreme — he drives around in a four-year-old Toyota Corolla and revels in flying economy class. Rahul Bajaj, too, spends relatively modestly despite his immense wealth, and Anand Mahindra likes driving in his custom-built Bolero instead of a flashy sports car.Anil Ambani is a fitness freak while many of his peers look as if they have not been inside any gym for years. There are great foodies and then there are the others who carry home-made food even while travelling. There are a couple of people who have collections of Bentleys, while at least one gentleman who can afford a Mercedes S-Class prefers his Skoda Superb because he "does not like to draw attention". 

But in general, the consumption habits of the new rich as well as the old rich have seen a boom in the business of luxury goods — from Rolls-Royces to private jets to expensive watches.

Pass It On Or Give It Away?And finally, are India's super rich learning the fine art of philanthropy? Not really. There are a fair number of extremely rich who believe in giving a big chunk of their wealth for certain causes. Azim Premji and Shiv Nadar are known for spending a lot of their personal wealth on education and other causes. But when Bill Gates and Warren Buffett came calling to persuade many of India's billionaires to give away their wealth, what hit the headlines was how many of India's extremely rich showed no interest in philanthropy. On that score, both the first-generation billionaires as well as the inheritors showed a fairly common trait — they preferred to pass on their wealth to the next generation rather than give it away. Will that change in the short run? It does seem unlikely.



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(This story was published in Businessworld Issue Dated 25-07-2011)