Counting The Money

How we estimated the wealth and earnings of billionaires

For the promoters of listed companies, we use the accepted method of estimating wealth based on the market value of their holdings in listed companies. This is the category we have been estimating for the last seven years. In line with international practices, we have eliminated crossholdings in their stakes. This results in wealth estimates based on the promoters’ direct holding in listed companies. The definition of promoters’ direct holdings also excludes holdings through trusts and other such devices, whose beneficial wealth cannot be traced directly to the promoters.

For this reason, the 7.51 per cent stake in Reliance Industries, owned by the Petroleum Trust, has been taken out of the promoters’ direct holdings. In effect, therefore, the value of Petroleum Trust’s stake worth Rs 7,453 crore has not been considered part of the promoters’ wealth. The Ambani family’s shareholding (and wealth) is smaller to that extent.

As in previous years, we estimated individual net worth by taking the average market price of shares for the last one months. So we estimated wealth for the current period on the basis of the average price for August 2005 and similarly for August 2004 for comparison purposes. Also, we estimated the net worth of individual promoters (or even members of the promoter family) only if a break up of the individual share holdings is available.

This year, 17 billionairs have unlocked their wealth through the public issues floated during year. These new billionaires could have made the entry had the public issues been done in 2004. Dhingra of Berger Paints got into the list on account of the promoters holding was known to us this year.

As for the salaried wealthy, we look at big-buck salaries, both of promoters who take a salary from the company and of professional managers. Strictly speaking, professional managers are a different genre. Unlike the previous two categories which are based on the stock concept of wealth, these are based on the flow concept of income. So obviously, these earning billionaires cannot be compared with the other billionaires.

Within the salaried lot, the biggest group is the professional managers, or middle class millionaires. Their earnings are reported in the annual reports of companies. By and large, these are very accurate but because of innovative compensation structuring the figures may tend to be a bit lower than the actual sums.

There is no systemic bias in the data. Data for promoters’ net worth are sourced from information on shareholding patterns published by the Bombay Stock Exchange. The data on the salaried classes are sourced from the annual reports of companies for the accounting years ending anywhere between April 2004 and June 200.•

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