Reliance emerges as biggest wealth creator over last 25 years, finds study

Most of the gains came in the last five years, shows Motilal Oswal's annual wealth creation report

What began as a yarn trading business has emerged as the biggest wealth creator over the last 25 years, growing along the way to enter sectors ranging from oil to telecommunications and retail.

Reliance Industries accounted for Rs 6.3 trillion in wealth created since 1995, according to Motilal Oswal Financial Services’ annual wealth creation study, the 25th edition of which was released on Tuesday. The closest rival was Hindustan Unilever which was at Rs 4.9 trillion.

Much of the gains came in the last five years. The study said that it added Rs 4.4 trillion in wealth between 2015 and 2020.

Companies like Infosys and Bajaj Finance also figured the list of fastest and biggest wealth creators.
 

“Over 1995 to 2020, the Sensex rose from 3,200 levels in March 1995 to 29,500 by March 2020 i.e. a compound annual growth rate (CAGR)  of 9.2…(per cent). Coincidentally, exactly 100 companies delivered returns higher than 9.2…(per cent)... We call these 100 the Fastest Wealth Creators,” it said.

The top twenty of the fastest wealth creators all gave the equivalent of 20 per cent returns every year. This included information technology major Infosys whose share price grew at the rate of 30 per cent over the last quarter century.  They also included Fevicol adhesive maker Pidilite Industries, and Eicher Motors, which manufactures the Royal Enfield brand of motorcycles. Others include Berger Paints India and Britannia Industries.

Similar consumer companies accounted for the bulk of wealth creation over the last 25 years. The sector accounted for around Rs 12 trillion of wealth creation. The closest to it was the oil and gas segment. It accounted for Rs 6.9 trillion.

Some of the gains in wealth creation for the fastest growing companies were on account of an expansion in earnings multiples. People were willing to pay 20 times annual profits for a share of Pidilite Industries in 1995. They are willing to pay 60 times earnings in 2020. Shree Cement saw its earnings multiple rise from 9 to 41 in the same period.

Earnings also seemed to mirror stock price appreciation. The top 100 stocks which beat the market saw earnings grow at the rate of 17 per cent a year over 25 years. Share prices also grew at 17 per cent since 1995. The top 25 stocks did better. Their share price grew at 23 per cent compared to a 22 per cent rise in earnings.