Reliance Industries largest wealth creator in 2016-21, says Motilal Oswal

Top 100 firms created Rs 71 trillion of wealth in the past five years, according to the study

Oil-to-telecom conglomerate Reliance Industries (RIL) has emerged as the country’s largest wealth creator, adding a staggering Rs 9.6 trillion over the past five years, according to Motilal Oswal’s 26th Annual Wealth Creation Study. In doing so, the Mukesh Ambani-led company has beaten its own record of Rs 5.6 trillion generated in 2014-19.

The study covered financial year 2015-16 (FY16) to FY21 and ranks the top 100 companies in descending order of absolute wealth created, subject to the company’s stock price outperforming the BSE Sensex. The firms were also ranked according to speed (price CAGR during the period).

The top 100 companies created Rs 71 trillion wealth in the past five years, by far the highest ever wealth created in the last 26 five-year periods, according to the study. They delivered returns of 25 per cent CAGR versus 14 per cent for the BSE Sensex.

Reliance’s re-emergence as the biggest wealth creator reflects the power of phygital (physical plus digital), according to the report. Its oil-to-chemicals and retail businesses are strongly rooted in the physical, whereas the telecom business is the digital dimension.

“RIL has strong management of cash flow, has been reinvesting judiciously and has been able to create world-beating businesses,” said Raamdeo Agrawal, chairman, Motilal Oswal Financial Services.

Two Adani group companies – Adani Transmission and Adani Enterprises – have emerged as the fastest wealth creator (price CAGR of 93 per cent) and most consistent wealth creator (highest price CAGR of 86 per cent) during 2016-21, respectively. Adani Enterprises was also adjudged the best all-round wealth creator.

According to the study, Rs 10 lakh invested equally in 2016 among the top 10 fastest wealth creators would have grown to Rs 1.7 crore in 2021 — a return CAGR of 77 per cent versus just 14 per cent for the Sensex.

“Eight out of top 10 fastest wealth creators had a market cap below Rs 2,000 crore in 2016. Further, most of them were reasonably valued then, especially relative to their growth prospects. Thus, the data confirms the obvious — for high wealth creation, pick small-to-mid companies with robust earnings growth prospects trading at reasonable valuations,” the report observed.

The financial sector was the top wealth creator among sectors, after briefly losing to consumer and retail in the previous study. Almost 25 per cent of total wealth created was through the sector, versus 18 per cent five years ago. The highest share gain was by the oil and gas sector, led by RIL. Two big losers in terms of share of wealth creation were autos and pharma.

“Technology is the only potential contender for the top spot next year. Led by rapid digitisation, the sector is bagging huge orders from overseas clients, leading to high growth visibility. Stock prices have responded handsomely,” said the report.

The wealth created by public sector undertakings (PSUs) during 2016-21 was the worst ever, with only two PSUs, Gujarat Gas and Indraprastha Gas, featuring in the list.

“Following the Air India model, the government is better off privatising as many PSUs as it can. This has a dual positive: The divested companies are likely to become more efficient, and equally important, and the resources raised from such privatisation can be used for socioeconomic development,” observed the report.