Virendra Pandit
Mumbai: Information technology bellwether Infosys has been the fastest, RIL the biggest, and Kotak Mahindra Bank (KMB) the most consistent wealth creators in India between 1995 and 2020, a study has revealed.
KMB is also the Top All-Round Wealth Creators—adding up the fastest, biggest and consistent ranks, according to the Motilal Oswal Financial Services’ Annual Wealth Creation Study, whose 25th edition was released on Tuesday.
Between 1995 and 2020, Infosys clocked a robust price compounded annual growth rate (CAGR) of 30 percent to emerge as the fastest wealth creator. This was backed by a 25-year profit-after-tax (PAT) CAGR of 33 percent.
The average market cap of the top 25 fastest wealth creators was Rs. 4 billion in 1995, which zoomed to over Rs. 750 billion in 2020. Those who invested Rs. 10 lakh equally in these 25 stocks in 1995 would have made Rs. 16.2 crore in 2020, delivering a 25-year CAGR of 23 percent, the report said.
Infosys and Bajaj Finance have a creditable performance of being among the Top 10, both in terms of the fastest and biggest wealth creators.
But KMB stands out in the list as the most consistent wealth creator in the last 25 years. In the 23 three-year rolling periods between 1995 and 2020, it outperformed the corresponding benchmark in 21 of those periods.
It was closely followed by Berger Paints and HDFC with 20 periods of outperformance.
The report said KMB was also the best all-around and consistent wealth creator. It ranks 14th among the fastest wealth creators, 5th among the biggest, and 1st among the consistent wealth creators.
This gives it a combined rank of 20, which is the best of the 100.
Six of the Top 10 consistent wealth creators are also among the top 10 fastest wealth creators – Berger Paints, Pidilite, Shree Cement, Honeywell Automation, Motherson Sumi, and Sun Pharma.
During the 25-year period, Reliance Industries Ltd created a wealth of Rs. 6.3 trillion to emerge the biggest wealth creator. It is significantly ahead of the second-ranked Hindustan Unilever (Rs. 4.9 trillion). Most of RIL’s wealth creation came in the last five years (2015-20) at Rs.4.4 trillion.
The Sensex rose from 3,200 levels in March 1995 to 29,500 by March 2020, with a CAGR of 9.2 percent. Coincidentally, exactly 100 companies also delivered returns higher than 9.2 percent, the report observed.
Top 20 of the fastest wealth creators gave the equivalent of 20 percent returns every year. This included Infosys whose share price grew at the rate of 30 percent during the period. Fevicol adhesive maker Pidilite Industries, and Eicher Motors, makers of the Royal Enfield motorcycles, Berger Paints India, and Britannia Industries also performed well.
The consumer sector companies accounted for the bulk of wealth creation over the last 25 years, with nearly Rs.12 trillion, followed by the oil and gas sector, with Rs.6.9 trillion, the MO report said.