Greatest All-Round Wealth Creator is Adani Enterprises: Motilal Oswal

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Motilal Oswal Financial Services released its Motilal Oswal 28th Annual Wealth Creation Study 2023 on 14 December 2023. The study report is divided into two parts: findings on Wealth Creation during the 5-year period 2018-2023 (March ending) and a theme Study focused on the power of Economic Profit.

Motilal Oswal’s studies analysed the top 100 wealth-creating companies from 2018 to 2023. The amount of wealth created is determined by comparing the market capitalization of companies between March ending 2023 and March ending 2018, taking into account corporate events like mergers and de-mergers, fresh capital issuance, buybacks, etc.

The study determines which money creators are the biggest, fastest, most reliable, and all-around.

Wealth creation between 2018-23:

The Wealth Creation performance of PSUs (public sector undertakings) from 2018 to 23 shows a notable improvement over the previous two studies: 7 PSUs accounted for 6% of wealth created.

PSU Wealth Creation has been fueled by two main factors: the turnaround of two banks (SBI and Bank of Maharashtra) and the expansion of the defense industry (Hindustan Aeronautics, Bharat Dynamics, and Bharat Electronics).

Between 2018 and 2023, Reliance Industries, Lloyds Metals, and Capri Global were the Biggest, Fastest, and Most Consistent Wealth Creators, respectively. The greatest All-Round Wealth Creator is Adani Enterprises.

The technology sector emerged as the largest wealth creator between 2018-23, followed by the consumer and financial sector.

All in all, the top 100 Wealth Creators of India Inc. generated a wealth of INR 70.5 trillion between 2018 and 23.

With a 21% CAGR, the Pace of Wealth Creation is significantly higher than the 12% return of the BSE Sensex.

Theme Study: Hockey-Stick Returns – The Power of Economic Profit

Understanding Hockey-Stick Returns

A significant and prolonged stock price increase is referred to as a “hockey stick” return.

This results in the hockey-stick formation of the price chart, which translates into delivering significant returns to the investors.

To generate these returns, invest in companies with strong earnings growth but at a reasonable valuation.

As per the study, 54 companies delivered Hockey-Stick Returns of at least 25% over the 10 years 2013 to 2023. Further, the analysis noted mid and small caps are favorably placed to deliver hockey-stick returns.

Wealth Destroyed during 2018-23:

A total of Rs 17 trillion, or 25% of the wealth created by the top 100 enterprises, was destroyed between 2018 and 23. This is still far lower than the Covid-hit study era of 2015–20.

The financial sector comprises six of the top ten wealth-destroying firms (including insurance firms).