Moneylife releases list of Wealth Creators of 2001-2010
Moneylife's study of 'Wealth Creators' this year, an annual research exercise and the most comprehensive such study of listed Indian companies, has thrown new surprises while teaching fresh lessons.
The Winners Are…
The most impressive performance came from the capital goods sector, which benefited immensely from the massive uptick in economic activity, thanks to all-round economic growth (real estate, manufacturing and infrastructure)
Texmaco (10th) gained from improved orders for heavy machinery and railway wagons, apart from the huge boost from rising real-estate prices. Crompton Greaves (13th) has capitalised on the burgeoning private and industrial demand for electrical equipment. These companies have delivered stellar compounded returns of 80% and 76%, respectively, over the decade. Some more consistent wealth creators from this sector are: Kirloskar Brothers (15th), Hindustan Dorr-Oliver (18th), Elecon Engineering (25th), Areva T&D (38th) and Thermax (56th).
Auto-component manufacturers have also made giant strides over the past few years, piggybacking on the phenomenal off-take in automobiles. As many as 41 companies figure among the top 500 wealth creators this year (up from 26 last year). Zooming into high gear is Shanthi Gears (33rd), which has clocked a robust compounded annual return of 64% over this period. Automobile Corporation of Goa (39th) and Banco Products India (43rd), yielded similar returns and have moved up several notches in the rankings. Some prominent wealth creators also include Motherson Sumi Systems (57th), Exide Industries (77th) and Balkrishna Industries (110th).
Rapid economic growth of the past few years has created massive demand for mining, steel & steel products, a sector that was down in the dumps in the 1990s; it was the first to witness revival in the 2000s. Bhushan Steel (30th), Prakash Industries (42nd) and Uttam Galva Steels (70th) leapfrogged several places up the charts. Sesa Goa (4th) has again emerged the top performer in this category, delivering compounded returns of 98% over this decade along with consistently high dividend payouts to its investors. Sesa Goa's fortunes, however, are intricately intertwined with China's appetite for iron ore which keeps prices high. Jindal Steel & Power (8th) is another company that has reaped the reward of the massive boom in natural resources; its shareholders have also benefited from its high valued-added product portfolio as well as diversification into mining and power. Some other steel products companies that have significantly advanced since last year are: CMI FPE (40th), Usha Martin (265th) and Oil Country Tubular (304th).
Fifteen companies from the consumer durables space appear among the top 500, up from eight, a year ago. Appliances & lighting solutions provider Bajaj Electricals (21st) and air-conditioning leader Blue Star (32nd) have yielded compounded returns of 71% and 64%, respectively. Pressure-cookers and kitchen solutions providers TTK Prestige (54th) and Hawkins Cookers (139th) have also created phenomenal value over these years. VIP Industries (174th), Whirlpool of India (287th) and Videocon Industries (389th) are other prominent names in this segment.
The software sector is among the largest source of employment while the commercial real-estate sector is almost wholly dependent on tech campuses. KPIT Cummins Infosystems (99th), with CATSR of 51% has just about managed to break into the top 100. Only 11 software companies find their name among the top 500.
Another sector that continues its downslide on the wealth creation charts is real estate. Only six realty companies find themselves among the top 500 this time, down from 10 in last year's rankings. India's second largest developer Unitech, however, continues to top wealth creation charts for the second year running. Unitech has been down in the dumps for almost three years now but the company still yielded a 10-year compounded return of 109%, turning a paltry Rs10,000 investment in December 2000 into an eye-popping Rs76 lakh today.
After a brief hiatus, many of the large-caps have stormed back into wealth creation charts. Non-ferrous metals and mining company Sterlite Industries (48th) has surged ahead after being down in the dumps for some time. It has provided 60% compounded returns over this decade supported by generous dividends along the way. Jewellery and watch retailer Titan Industries (72nd) has also taken giant strides, delivering solid 55% returns. Titan continues on its expansion drive, with plans to add 100 stores over the next five years. FMCG major Dabur India (95th) has yielded 52% annual returns.
However, some prominent large- and mega-caps, such as Zee Entertainment Enterprises, continue to languish at the bottom of the charts. An investment in Tata Teleservices would have fetched investors a return of just 9% over 10 years. Many other big names have even destroyed shareholder value over these years. These include Mahanagar Telephone Nigam (-5%), Sterlite Technologies, GTL and Nirma (-1% each).
Last year, an incredible 28 stocks belonging to the micro- and small-cap space had made their presence felt among the top 100 wealth creators' list. They have since shrunk to 15. Some of the success stories are still holding their ground though-Kirloskar Industries (16th), Shanthi Gears (33rd), Vimta Labs (37th) and Genus Power Infrastructures (50th). Some prominent mid-cap companies featuring in this list are: Mercator Lines (6th), Sanghvi Movers (17th), Kirloskar Pneumatic (31st) and Orient Paper & Industries (59th).
The Wealth Creator's Study
If there are some lessons we can derive from a 10-year study such as this one, they would be:
o Take a lot of common ideas about wealth creation with a pinch of salt. For one, higher GDP growth does not translate into high returns from stocks you own. Conversely, even when GDP growth is low, some sectors and stocks will do very well. Two, popular and well-performing companies may deliver average to poor returns. Their future growth may already be reflected in the stock price.
o Smaller companies offer better potential for returns, but carry substantial risk.
o The single most important factor that determines stock returns is the starting price. You just have to be patient and buy cheap.
o Following the above-mentioned point, buying unloved and beaten down stocks and sectors could be one way to catch hold of the next Unitech or Sesa Goa.
o Having done that, remember that the bulk of stock returns comes only in bursts-much of the gains in stocks today were captured during the bull market of 2003-07.
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