Riding The Bull Wave

India’s billionaires have never had it so good. The stock market has scaled new highs, and both billions and billionaires have multiplied, reports BG Shirsat.

Who would have thought that three 30-year-old entrepreneurs wo-rking from two computers in a tin-roofed office near the Hauz Khas bus terminal in New Delhi would enter The Billionaire Club list six years later? We’re talking about Sameer Gehlaut, Rajiv Rattan and Saurabh Mittal, promoters of Indiabulls Financial Services, whose combined 31 per cent stake in the company is today worth over Rs 11.50 billion.

These three IIT-Delhi alumni have come a long way from their Hauz Khas days – their business today has a market cap of Rs 3,700 crore, and they claim 1.4 lakh clients across 95 cities, serviced through a network of nearly 250 offices and 3,500 employees.

Six years ago, before Indiabulls was launched, the three had lucrative careers, but nothing out of the ordinary. Sameer Gehlaut had a successful earth moving equipment business – Mackenna Minerals & Equipment. His family runs it now. Rajiv Rattan had quit his job as operations manager at Schlumberger, where he was working for a Canadian client in Yemen, and Saurabh Mittal had given up his career with Citigroup Asset Management as an investment analyst in New York.

Even a year ago, when they decided to float Indiabulls at Rs 19 per share, the trio were worth only Rs 92 crore. Their dramatic debut in the rich list is the result of a spectacular rise in the stock, which has multiplied more than 10-fold in the past year. Clearly, the Indiabulls promoters have much to thank the markets for.

India billionaires have never had it so good. The stock market has scaled new highs, wealth has soared, and the billions have multiplied. The results have been eye-popping: the collective net worth of the list of BS Billionaires has gone up by 71 per cent – Rs 3.64 trillion (Rs 364,572 crore) from Rs 2.13 trillion (Rs 213,357 crore) last year, computing current wealth on the basis of average market prices for promoters’ stocks in August 2005.

As a matter of fact, the bull run in equities has meant that membership in the BS Billionaire Club has swollen a huge 80 per cent, from 178 last year to 311. Nearly 33 billionaires have recorded an astounding increase of over Rs 10 billion (Rs 1,000 crore) each in their assets in the last year. Thanks to the broad-based market rally, even the promoters of small and medium firms have seen their net worth zoom. That’s the reason why as many as 144 new entrants, two-thirds of them entirely self-made, have been able to make their way through the portals of The Billionaire Club. These newcomers added over Rs 224 billion to their collective net worth last year, taking their aggregate wealth to over Rs 408 billion (a staggering Rs 40,815 crore).

Despite their spectacular ascent, the Indiabulls promoters are not the richest new entrants into the Billionaires Club. That prize goes to India’s private airlines tycoon Naresh Goyal, who listed Jet Airways in April 2005 through a public float. He debuts on the list as the wealthiest new billionaire, with a net worth of Rs 81 billion (Rs 8,100 crore). Naresh Goyal, 55, vaulted to his position as the sixth richest Indian through his ownership of 80 per cent of Jet Airways–quite an achievement for someone who joined the travel business as the sales agent for Lebanese International Airlines.

Jet Airways took wing on May 5, 1993. In 12 years, it has become the country’s largest airline. For the year ended March 31, 2005 Goyal’s airline’s total revenue stood at Rs 4,338.01 crore with a net profit of Rs 391.9 crore. It currently has a market share of around 46 per cent and operates over 1,924 flights weekly.

It hasn’t been an easy flight though, from being an employee at his relative’s airline agency to floating an airline himself. Along the way, Goyal has had to contend with his share of controversies over his business plans, and tough competition from Indian Airlines and rival private carriers.

Goyal even had to buy out two investors – Gulf Air and Kuwait Airways, after the government changed the policy in 1999 barring foreign airlines from holding equity in Indian carriers. But Goyal’s grit has enabled him to ride out these air pockets. Another professional who has seen his wealth rise more than ten-fold in the past year (from Rs 136 crore to Rs 1,918 crore) is Jignesh Shah, who started his own software product company 10 years ago, which today is known as Financial Technologies (India) Ltd. With an engineering and a post-graduate degree under his belt, Jignesh started his career with the Bombay Stock Exchange (BSE) in 1990. During his stint at BSE, he led a team of professionals that conceptualised and implemented BOLT – The BSE On-Line Trading system. Shah’s strong background in technology and his knowledge of exchanges has been successfully married in his own company and in the success of its commodities exchange. But it’s not only technology whiz kids who have been successful in tapping the potential of the country’s sunrise industries – telecom magnate Sunil Mittal, the third-richest billionaire, is this year’s biggest gainer, adding Rs 137 billion to his net worth to take it to Rs 263 billion (Rs 26,293 crore). The 47-year old Mittal has made the transition from bicycle parts dealer to push button telephone manufacturer to the nation’s most successful telecom tycoon with aplomb, and the listing of Bharti Enterprises easily propelled him to the top of the rich list.

THE VERDICT AZIM PREMJI retains grip as the No.1 billionaire. The gap between the top two richest Indians, Premji (Rs 419 billion) and the Ambanis (Rs 377 billion), narrowed further this year, though Premji hung on to his Billionaire of the Year title for the 6th time in the last seven years. But it’s also a sign of the changing times that the combined IT billionaires have seen their share in the total wealth of the BS Billionaire Club come down from 23.1 per cent in 2004 to 21.5 per cent. Yet, Premji rules – he’s the undisputed king

Wuthering heights What goes down, does come up again. The traditional sectors have made a rousing comeback this time In just two years, we have added 199 new names to the ranks of The Billionaire Club: 49 last year, and 144 this year. The aggregate networth of the billionaires (311 this year) has grown 70 per cent, from Rs 213,356 crore to Rs 364,572 crore. The wheel of fortune has come full circle. Five years ago, the melting of the ICE stocks saw at least 130 billionaires forced off the rich list, and by 2001, the list was a pale shadow of its former self, with the number of billionaires reduced to a mere 88. Compare that with the record number of 144 new billionaires this year, and you get a fair idea of how good the times are for making serious money. To be sure, the new billionaires account for only 11.2 per cent of the total wealth of The Billionaires Club, but what’s significant is that they have increased their wealth by a whopping 121 per cent in the last one year. And as many as nine of the new billionaires have seen the value of their holdings rise by a stunning 1,000 per cent in the last one year. The worth of 26 of the new billionaires increased by between 500 and 1,000 per cent. The gains have been very broad-based, coming from over a dozen different industries. The new billionaires are from sectors such as broking houses, property development, print media, exporters, engineering construction, auto ancillaries, engineering, power equipment and pharmaceuticals. Bullish stock markets, a weak dollar and surging commodity and real estate prices have all played a part in showering wealth upon the billionaires. Among the traditional favourites, pharma, for instance, has made strides with India proving to be an enduring global discovery lab of sorts. Indian pharma companies have moved ahead based on their initial initiatives in drug discovery research in the late 1990s. Retail is clearly another area that’s set to take off. And the performance this time more than proves this. All the usual paeans about rising incomes, changing demographics and consumer tastes hold true in its favour. While modern retail currently accounts for just 3 per cent of totalretail, the emergence of tycoons such as Kishore Biyani of Pantaloon, Tata’s Trent and K.Raheja’s venture among others are amply represented in the list of successfuls in the list this time. There are expectations that modern formats will increase their share to 9 per cent by 2010. All said, almost 17 new billionaires benefited from the overwhelming response to new issues. The 17 new issues mobilised around Rs 43 billion from the market, in the process unlocking Rs 142 billion worth of wealth for their promoters. And thanks to medium-scale enterprises getting better valuations on the Indian bourses, several old-fashioned entrepreneurs like A C Muthiah, Arun Bharat Ram and M M Thapar become billionaires again this year.

This year too, new listings have been a great means of unlocking wealth. Around 17 of the new billionaires joined the club after hefty additions to their net worth by unlocking their wealth through new issues. Jet Airways, HT Media, Deccan Chronicle, Indiabulls Financial Services and Shopper’s Stop are some of the new listings this year that have delivered stunning rewards for their promoters. Jet Airways promoter Naresh Goyal is ranked 6th on the billionaires list on listing, the K K Birla Group’s valuation has jumped to Rs 2,780 crore from Rs 385 crore last year after HT Media got listed, and the Indiabulls promoters have increased their net worth by over Rs 1,000 crore, while the promoters of Shopper’s Stop have seen their wealth grow by over Rs 800 crore after listing. Nor is it only hot new sectors like technology or telecom that are adding wealth–some old tycoons in very traditional industries are doing equally well. Take Vijay Mallya, the “king of good times” and his liquor business.

Part Apart The Reliance empire saw a split on June 18 this year. With this, Mukesh Ambani gets control of Reliance Industries and Indian Petrochemicals. Anil Ambani takes charge of Reliance Energy, Reliance Capital and Reliance Infocomm. However, the formal split process is still continuing and hence it’s not possible to arrive at the networth of Mukesh Ambani and Anil Ambani separately. We have taken their collective networth into count this year

His move in buying arch-rival Shaw Wallace has led to his net worth rising from a paltry Rs 443 crore to a whopping Rs 2,226 crore. Mallya has the unique distinction of making his racy, party-going, fun-loving larger-than-life image into a brand – Kingfisher. It’s a fun way of raking in the moolah.

Mirroring the broad-based nature of the market rally, billionaires now come from a wide variety of sectors. India’s richest moguls continue to be from software and the other services sectors, while pharmaceuticals, steel, automobile and diversified businesses are other segments that have spawned a large number of billionaires. Similarly, the new entrants are from sectors as varied as construction, retailing, sugar, media, services, engineering, IT and pharmaceuticals.

But the main message that the rich list throws up is a simple one–with the opening up of the economy, opportunities have mushroomed in every field, and entrepreneurs have been quick to grab their chances. How else does a relatively new entrant like Subhash Chandra amass more wealth than the blue-blooded Nusli Wadia? How is it that Kumarmangalam Birla, with all that family wealth behind him, is only at number 8 in the rich list?

Just in case you thought that a billion rupees is no big deal, the top twelve of our billionaires are dollar billionaires as well. What’s more, this past year we had five new dollar billionaires joining the ranks. These new additions, each of whom is worth more than $1 billion, are Naresh Goyal of Jet Airways, Anil Agarwal of Sterlite, Rahul Bajaj of Bajaj Auto, OP Jindal of Jindal Steel and Baba Kalyani of Bharat Forge. Interestingly, four out of those five are in manufacturing industries.

And finally, it’s not just the rise in the stock market that has led to a rash of new billionaires – the soaring value of land owned by promoters of sick textile mills in Mumbai has led to their getting entry passes to the billionaire club. Radhakrishna R Ruia, the promoter of Phoenix Mills, is valued at Rs 5 billion, while Navinbhai C Dave of Swan Mills and Manharlal Chunilal Shah & family of Ruby Mills are valued at over Rs 1 billion each. The three Indiabulls promoters, along with their joint venture partner Farallon Capital, have invested Rs 720 crore in the real estate business – Indiabulls Real Estate was incorporated in May this year.•