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Stocks of the Anil Dhirubhai Ambani-led ADAG Group, G M Rao–promoted GMR Group, Jaypee Group and DLF are among the top business houses set to emerge as prominent wealth destroyers as measured by the combined market capitalisation (market cap) of the listed entities in the equity market during calendar year 2014 (CY14). Business houses with a combined market capitalisation of more than Rs 5,000 crore of their listed entities were considered for this study.
Jaypee Group, largest loser among the business houses, has seen value erosion of nearly 40 per cent in market cap during the year. The market value of three of the group’s listed entities Jaiprakash Associates, Jaiprakash Power Ventures and Jaypee Infratech, had declined 39 per cent to Rs 12,805 crore till Monday, Capitalineplus data show.
The Mukesh Ambani-led Reliance Group, Vijay Mallya-promoted UB Group, Videocon, Vedanta, Sun Group and Godrej Group stocks also underperformed the market, recording less than 15 per cent return during CY14, as compared to a 29 per cent rise in the S&P BSE Sensex in CY14. With a rise of around 29 per cent in the benchmark S&P BSE Sensex, CY14 has been the best year for Indian equity markets since 2009 (in terms of percentage rise), when the benchmark index surged around 81 per cent.
U R Bhat, managing director, Dalton Capital Advisors, said, “Most of these companies operate in the real estate/construction/infrastructure and power sectors. In all these sectors, there are a lot of impediments. Since there is no policy clarity, this is being reflected in the stock performance.”
OP Jindal Group also reported a more than 30 per cent decline in market wealth due to dismal performance of its flagship company, Jindal Steel & Power.
“Each of these groups had their own set of problems. DLF, for instance, faced regulatory issues. Jaypee Group is a classical de-leveraging story, where the company is trying to sell assets to lower the debt burden. It recently sold its cement assets to UltraTech Cement. So, individually, stocks of these groups have their own set of problems that have remained as an overhang,” explains Mayuresh Joshi, vice–president (institutional), Angel Broking.
The combined market value of four ADAG Group companies eroded 7.5 per cent or Rs 5,074 crore to Rs 62,326 crore. The group’s power and communication businesses lost Rs 10,562 crore in market capitalisation (market-cap), more than offsetting the performance of the infra and financial a services businesses which saw market cap gain of Rs 5,488 crore.
Bhat says the stocks could play catch-up if there is clarity on policy regarding the infrastructure and power sectors.
The market value of the Mukesh Ambani-led Reliance Group’s five listed firms —Reliance Industries (RIL), Reliance Industrial Infrastructure, TV18 Broadcast, Network18 Media & Investments and Infomedia Press -- rose marginally by one per cent to Rs 3,02,950 crore.
Thanks to regulatory uncertainty related to gas pricing, RIL’s market value increased by nearly one per cent to Rs 2,90,186 crore. The remaining four companies have seen an average 54 per cent price appreciation.
Wealth creators
On the other hand, Gujarat-based Adani Group, Pune-based Finolex Group, Baba Kalyani Group, Kirloskars Group, Hinduja Group, R P Goenka Group, Torrent Group, K K Birla Group, Wadia Group and Shriram Group are among the highest wealth creators. The market value of their stocks appreciate between 50-100 per cent during CY14, outperforming the rise in the benchmark index.
The market value of six of the Baba Kalyani Group’s listed entities — Bharat Forge, Kalyani Steels, Automotive Axles, Hikal, BF Utilities and Kalyani Investment Company — soared 150 per cent to Rs 27,946 crore from Rs 11,158 crore at the beginning of the calendar year. Of these, Bharat Forge accounted for more than half of this addition of Rs 14,253 crore. Stocks of Tata Group also saw their combined market cap increase nearly 20 per cent, to Rs 809,087 crore during CY14.
“A lot of these companies are also capturing the export market and that’s where they are getting their delta in terms of revenues and profits. In addition, there is growth visibility. With the opening of the defence sector, companies like Bharat Forge will stand to gain,” says Bhat. Stocks like JK Tyre, JK Lakshmi Cement and JK Paper that are part of the JK Group have also seen their combined market cap gain nearly fourfold during the year.
