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According to Motilal Oswal, Reliance Industries’ greatest wealth creator in 2016-21

Oil and telecommunications conglomerate Reliance Industries (RIL) has emerged as the country’s largest wealth creator, adding Rs.9.6 trillion over the past five years, according to Motilal Oswal’s 26th Annual Wealth Creation Survey. In doing so, the company headed by Mukesh Ambani broke its own record of Rs 5.6 trillion generated in 2014-19.

The study covered fiscal year 2015-16 (FY16) through FY21 and ranks the top 100 companies in descending order of absolute wealth created, subject to the company’s stock price outperforming BSE Sensex. Companies were also ranked based on speed (price CAGR over the period).

The top 100 companies have created 71 trillion rupees over the past five years, by far the highest wealth ever created in the past 26 five-year periods, according to the study. They delivered returns of 25 percent CAGR versus 14 percent for the BSE Sensex.

Reliance’s re-emergence as the world’s largest wealth creator reflects the power of phygital (physical plus digital), according to the report. Its activities in the transformation of petroleum to chemicals and in distribution are strongly anchored in the physical, while the telecoms business falls under the digital dimension.

“RIL has strong cash flow management, has reinvested wisely and has been able to build world class businesses,” said Raamdeo Agrawal, president of Motilal Oswal Financial Services.

Two companies in the Adani Group – Adani Transmission and Adani Enterprises – emerged as the fastest wealth creator (93% CAGR price) and the most consistent wealth creator (highest 86% CAGR price) over the course of the period 2016-21, respectively. Adani Enterprises was also voted Best All-Round Wealth Creator.

According to the study, Rs 10 lakh invested equally in 2016 among the 10 fastest creators of wealth would have reached Rs 1.7 crore in 2021 – a CAGR of return of 77% against only 14% for the Sensex.

“Eight of the 10 fastest wealth creators had market caps of less than Rs 2,000 crore in 2016. Moreover, most of them were reasonably valued at the time, especially in relation to their growth prospects. the data confirms the obvious – for high wealth creation, choose small to medium-sized companies with strong earnings growth prospects and trading at reasonable valuations, ”the report observes.

The financial sector has been the leading wealth creator among sectors, after briefly losing out to consumption and retail in the previous study. Almost 25% of the total wealth created has been created by the sector, up from 18% five years ago. The largest increase in market share was recorded by the oil and gas sector, led by RIL. The two big losers in terms of the share of wealth creation were the automobile and pharmaceuticals.

“Technology is the only potential candidate for the top spot next year. Led by rapid digitization, the sector is recording huge orders from overseas customers, resulting in high visibility for growth. Stock prices have responded generously, ”the report said.

The wealth created by public sector enterprises (PSUs) during the 2016-21 period was the worst ever, with just two PSUs, Gujarat Gas and Indraprastha Gas, making the list.

“Following the Air India model, the government had better privatize as many power supplies as it can. This has a double advantage: the divested companies are likely to become more efficient and equally important, and the resources derived from such privatization can be used for socio-economic development, ”the report observed.

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