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BW Businessworld

Stars Of Shining India

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India’s Super Rich last fiscal were blessed with a unique counter-intuitive economic phenomenon: the economy ground to a halt, but confidence about the future remained high; industrial activity was at its nadir, but inflation remained high; public issues were few and far between, but interest in capital-raising remained high; domestic capex dried up, but foreign institutional investment remained buoyant.

In the midst of all this, the stock market was on steroids. Despite poor economic conditions, the BSE Sensex and the NSE Nifty rose 18.67 per cent and 17.53 per cent, respectively.

But then, stock price is nothing but the current price of a share’s future earning potential. And while the hacks at the Indian National Congress cry foul every time this is mentioned, the public in general and investors in particular saw a ray of hope in Bharatiya Janata Party’s (BJP) prime ministerial candidate Narendra Modi, who has built a reputation as a doer. Eventually, the electorate opted for him, giving BJP an unprecedented mandate to bring relief from the stodgy performance of the Congress-led United Progressive Alliance government.

Nearly every promoter rode this wave of hope as investors continued to repose their faith in companies and the Indian economy. The collective wealth of India’s 500-odd Super Rich, with at least Rs 100 crore in stock value, grew 22 per cent from Rs 18 lakh crore in FY2012-13 to Rs 22 lakh crore by end-March 2014. At today’s prices, the wealth will be substantially higher as both Sensex and Nifty have shot up 12.39 per cent and 12.22 per cent, respectively, since 1 April 2014.

Thanks to the jump in the market capitalisation of companies, the number of dollar billionaires has gone up from 46 (when the rupee/dollar rate was at Rs 51) in 2012 to 47 this year, despite the massive depreciation in the rupee (Rs 60/$).

But some promoters did vastly better than others. Adani group chairman Gautam Adani’s meteoric rise among the hundreds of business families coincides with Narendra Modi’s 13-year reign in Gujarat, where most of Adani’s big projects, including the port and power plant, are located.

From the time Modi was announced as BJP’s prime ministerial candidate on 13 September 2013 until 31 March 2014, Chairman Adani’s marketcap rose 73 per cent — the highest among the top 10 in those six months. During FY2013-14, his marketcap has risen 54.42 per cent, crossing Rs 70,000 crore. Since 1 April, it has gone up another 26 per cent to around Rs 88,200 crore on 18 June 2014.

But the biggest gainer  among the top 10 last fiscal was Shiv Nadar’s HCL group (Rank 9), largely due to an organisational restructing at HCL Infosystems that led to greater efficiency and better than expected performance by HCL Technologies. The widespread rumours of a cash-out by the promoters also sent the HCL group’s stock prices soaring.

The top 10, incidentally, overwhelmingly dominate the Super Rich rankings, accounting for 54 per cent of the wealth of all Indians with Rs 100 crore or more of stock market wealth. In the previous year, they added up to 52 per cent.

Among the top five, the Tata group trusts, with over Rs 3 lakh crore in shareholder wealth, grew the most; they rose 32.79 per cent to Rs 4.11 lakh crore. That is three times Mukesh Ambani’s wealth, which grew 20 per cent to Rs 1.36 lakh crore. Just the Tata group companies added over Rs 1.01 lakh crore in wealth last fiscal, which is comparable to Anil Agarwal’s total wealth of Rs 1.03 lakh crore.

But the group does not figure in the rankings as all Tata companies are owned by the holding company Tata Sons, in which the Tata philanthropic trusts have a 66 per cent stake. The most prominent of those being the Sir Dorabji Tata Trust and its allied trusts, the Sir Ratan Tata Trust and the Navajbai Ratan Tata Trust (see The House of Tata). The wealth of  Tata companies does not go to a family, unlike others.

The Dampener
The biggest casualty of the poor economy, of course, was big-ticket mergers and acquisitions as companies sat tight on their cash pile. Hence, the spurts in valuation through inorganic growth seen among Indian corporate houses between 2007 and 2009 were missing in fiscal 2013-14.
With companies unsure about an economic recovery, their fund-raising plans also remained in limbo. The biggest initial public offering (IPO) during FY2013-14 was a mere Rs 919 crore by Justdial as against Bharti Infratel’s Rs 4,118-crore IPO in 2012-13. Corporate India raised less than Rs 1,700 crore last fiscal compared to Rs 6,000 crore in 2012-13 and a record Rs 37,000 crore in 2010-11.

Statutory Warning
Equities, after all, are an ‘all or nothing’ investment avenue. Investors in the stock market must research their target companies thoroughly before investing. Since equities do not have a lien on the company’s assets, they not only offer unlimited earning potential, but also, a 100 per cent capital erosion risk.

So what should raise your antenna? Frequent changes in the name of a company is the biggest giveaway. It could either mean the company is changing its line of business far too often, or that it is trying to monetise the fad of the current times (ranging from IT/BPO to finance and plantations). More often than not, it is the latter.

Second, a sudden jump in market value must always be accompanied by a new plant, a new retail facility or a new business.  Any sudden spurt (page 60) in promoter wealth must be seen through that lens. Though there are several promoters whose businesses have grown organically, the list also features names like Globus Constructors, promoted by Arush Tandon and Akash Khanna, whose stock market value has shot up nearly 57,000 per cent from Rs 2 crore in fiscal 2012-13 to Rs 1,216 crore. In the past, the company changed its business from carpets and woollen garments to real estate, and then to clean energy. The company refused to share details sought by BW.
Among the Indians who do not figure in the list of India’s wealthiest are some of the world’s richest non-resident Indians, including ArcelorMittal’s Lakshmi Niwas Mittal, who is worth around $20 billion; the Hinduja brothers — Srichand, Gopichand, Prakash and Ashok — worth over $12.4 billion; Jaipur-born Kamlesh Punjabi (now Japanese citizen Ryuko Hira) whose hospitality empire is estimated at $10 billion; and Ananda Krishnan of Malaysia’s Maxis Communications, valued at $7 billion. Not to forget Mickey Jagtiani of UAE-based Landmark group, London-based Swraj Paul of the Caparo group and US-based Vinod Khosla of Khosla Ventures.

The First-timers
If Globus leaves you flummoxed, don’t lose heart. Take the case of some of the new entrants to the list of India’s Super Rich. Shrimp exporter Alluri Indra Kumar of Avanti Feeds rode the 150 per cent rise in shrimp prices globally to report a 75 per cent growth in revenue and a 130 per cent hike in profits. The stock market rewarded him with a 500 per cent jump in wealth.

Active pharmaceutical ingredient (API) maker C. Krishna Prasad made a strategic decision to create a manufacturing value chain of popular APIs from powder to finished dosages as opposed to being a contract manufacturer. That helped his firm Granules India grow at 22 per cent to over Rs 1,000 crore in revenues. His wealth has grown nearly 300 per cent.
The Tata group holds its own in the sea of Indian entrepreneurs, thanks to its founders who vested control over the wealth of the group in philanthropic trusts rather than individuals. As a result, despite being the wealthiest group in the BW | Businessworld list of India’s Super Rich, it does not figure in the rankings. The trusts own 66 per cent equity in the group’s holding company, Tata Sons. The second-biggest shareholder in Tata Sons is industrialist Shapoorji Pallonji Mistry with 18.4 per cent. Last year’s sizable wealth creator in the group was TCS, which grew 35 per cent to Rs 4,16,860 crore in market capitalisation. Tata Motors, too, rose 48 per cent on the back of Jaguar Land Rover’s performance, Tata Steel surged 26 per cent due to improved sales in Europe, Tata Chemicals lost 11 per cent in value and Tata Power remained unchanged.

With that, we leave you with this collector’s issue and a few recommendations. While most of India’s Super Rich continue to strive to grow their wealth, at least some decided to cash out (page 66). This package also contains a set of insightful columns from leading experts on topics ranging from how to time the market (if anyone can) to managing wealth through trusts and the dying breed of crony capitalists. What this list does not include is private billionaires such as Cyrus Poonawalla of the  Poonawalla group, T.S. Kalyanaraman of Kalyan Jewellers and Nitin Sandesara of the Sandesara group, who have all opted not to list their companies. 

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(This story was published in BW | Businessworld Issue Dated 14-07-2014)