Top business groups underperform Sensex

A host of market trail-blazers like Infosys, Satyam, Zee Telefilms and Cipla multiplied their market capitalisation (total market value of all listed shares) in the last one year, but eight leading business groups stand out for their below average performance on the stock exchanges. Bajaj, Oberoi, Essar, BSES, Punjab Tractors, Asian Paints, Tatas and BK Birla group are top business groups which underperformed Sensex last year.

Put simply, the appreciation in the stocks of companies belonging to these groups were below the average rise when compared to other shares. The Bombay StockExchange Sensex rose by 63 per cent to 4651 (as on November 7, 1999) from 2853 on October 19, 1998. “When the market in general showed a 63 per cent rise, these eight groups failed to catch up with the general market trend. They have failed in creating more wealth for shareholders, said an analyst with a large corporate house.

This was revealed in a study of 45 leading business groups based on the percentage change in market cap from the beginning to the end of Samvat 2055 (as per the Hindu calendar). These 45 business groups, which had a market cap of 2,68,996 crore, added Rs 1,61,976 crore in Samvat 2055, a gain of 151.4 per cent.

The Bajaj group, headed by none other than Confederation of Indian Industry president Rahul Bajaj, leads the list of Sensex underperformers. The market cap of Bajaj fell by 25 per cent to Rs 5,585 crore from Rs 7,444 crore, clearly indicating that the group indeed destroyed shareholders wealth. The Oberois, which run the Oberoi hotel chain, follows the Bajaj group with itsmarket cap falling 4.5 per cent to Rs 1,123 crore from Rs 1,176 crore. Essar which is now knocking at the doors of financial institutions for a bail-out just managed to retain its market cap at Rs 1,570 crore. However, this represents an under performance of 62.8 per cent in relation to Sensex.

Power major BSES showed only a 7.5 per cent rise in market cap to Rs 2,271 crore from 2,113 crore. Punjab Tractors which announced record profits and dividend last year failed to repeat that performance on the stock markets with the company adding only 45 per cent to the market cap at Rs 2,487 crore. Same is the case with Asian Paints which successfully staved off a takeover attempt last year. This paint group added only Rs 566 crore to its market cap of Rs 1,676 crore.

The Tatas, the numero uno business group, also underperformed the market with various companies in the group showing only a 56.5 per cent rise in market cap at Rs 26,987 crore as against Rs 17,248 crore last year. But this represents a 6.5 per centunderperformance with respect to Sensex. The BK Birla group, which is likely to come under the fold of the Aditya Birla group, managed a 62.1 per cent rise in its market capitalisation, just below the Sensex rise of 63 per cent. These eight business groups created a total wealth of Rs 9,797 crore in Samvat 2055, underperforming Sensex by 33.4 per cent.

Among the wealth creators which outperformed the Sensex, there are no surprises. The Essel Packaging group (including Zee Telefilms) of media mogul Subhash Goel showed a 1251 per cent jump in market cap to Rs 18,807 crore from Rs 1,398 crore. This was followed by Infosys with a 625 per cent jump to Rs 26,749 crore from Rs 3,685 crore. Others include Cipla (from Rs 1810 crore to Rs 7,916 crore), Adani group (from Rs 324 crore to Rs 1,200 crore), Sun Pharma (Rs 520 crore to Rs 1,783 crore), Ranbaxy (from Rs 3,584 crore to Rs 11,451 crore) and Wipro (from Rs 9,081 crore to Rs 28,186 crore)."Gone are the days of excessive speculation. Shareholders areincreasingly looking at the track record of companies in wealth creation before making investment decisions," said a fund manager. For the investors at large, the market value of the stock is more important at the end of the day.

This means corporates and business barons can no longer ignore shareholders after raising funds from them. Knowledge firms like Infosys, Wipro and NIIT have no manufacturing units of the scale of Essar or Bajaj but they multiplied the wealth of investors with the brains of their employees.

There’s no wonder that promoters and other shareholders of these relatively new entrants are now topping the list of billionaires in India. This is also a lesson for underperformers in the market. Investors are looking at good returns from their investments. So add value to their wealth.