The sharp rally in mid- and small-cap stocks in 2017 has not only made investors rich but also added to the fortunes of promoters of listed companies. And, many of them have joined the exclusive club of dollar billionaires.
Motilal Oswal and Raamdeo Agrawal of Motilal Financial Services, K M Mammen of MRF, Nimesh Kampani of JM Financial Services, R G Chandramogan of Hatsun Agro Products, and V C Nannapaneni of Natco Pharma are some of the new additions to the dollar billionaires’ club, who enjoy a net worth of over Rs 6,450 crore or $1 billion.
This has been calculated on the basis of the promoters’ holdings in their respective listed companies as on December 31, 2016, and March 31, 2017, and the difference in the market prices on December 31 and May 31 this year. The calculations ignore cross-holdings.
The rise in the number of companies that comprise this elite club in CY17 has been fuelled by a sharp rally in the mid- and small-cap stocks and an appreciation in the rupee (against the dollar) value by five per cent to 64.51 in May from the end of December.
The rally in financial services shares has seen the Motilal Oswal Financial Services and JM Financial stocks double from the December quarter. While Motilal Oswal Financial Services’ founders began as sub-brokers in the late 1980s, JM Financial’s Kampani is a veteran investment banker with decades of experience.
Natco Pharma has been one of the few pharma companies to have bucked the disappointing performance seen in the sector in recent times, and the stock’s 50-per cent rally in 2017 helped its promoter V C Nannapaneni enter the billionaire club. Vakrangee, which has managed to create a retail physical presence across a large part of the country using technology, has seen its stock price gain 50 per cent.
Tyre manufacturer MRF and South-based dairy company Hatsun Agro are two other stocks that have enriched promoters, the Mammen family and Chandramogan R G, respectively. Varun Beverages, a bottler for PepsiCo, which was listed last year, has also led to Ravi Jaipuria becoming a billionaire. Kochouseph Chittilappilly, the promoter of electrical appliances maker V-Guard and theme park company Wonderla, also has net worth of over Rs 6,500 crore.
At the bourses, the S&P BSE SmallCap index (up 25 per cent) and the S&P BSE MidCap index (up 22 per cent) have outperformed the S&P BSE Sensex’s 17 per cent gain from its recent low of 26,626 levels (December 30) to 31,146 (May 31).
Investors have chased companies that promise growth and are available at attractive valuations, experts say.
“In some of the stocks, investors have chased growth where the fundamental prospects improved. MRF, for instance, caught investors’ fancy as the input price for the company (rubber) crashed. Given the ample liquidity, investors are always scouting for good investment themes and do not mind paying a premium, given the long-term bull run the Indian markets are in,” explained G Chokkalingam, founder and managing director of Equinomics Research & Advisory. The rally has also seen many founders and promoters returning to the list. They include Kishore Biyani of Future Group, Irfan Razack of Prestige Estate Projects, Anu Aga of Thermax, Achal Bakeri of Symphony, Analjit Singh of Max Financial Services and Arun Bharat Ram of SRF.
Going ahead, good quality stocks and companies that have strong balance sheets will continue to add to investors’ and promoters’ wealth, experts suggest. Market experts continue to remain bullish on mid-cap stocks even as they say that those will be impacted more in the case of a correction.
“The mid-caps are quite volatile now and can fall more than the frontline indices in case of a market correction. However, I like this space from a two-three year perspective,” says Jyotivardhan Jaipuria, founder and managing director, Veda Investment Managers.
As the economy recovers, the earnings growth will be much faster for the companies in this segment, he adds.
“I expect a lot of economy-related plays to do well in the mid-cap basket, including auto ancillaries and infrastructure. The earnings growth for select mid-caps could be over 25 per cent for the next three years,” adds Jaipuria.