You are on page 1of 40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

ThemacStudy|December2016

21STANNUALWEALTHCREATIONSTUDY
(20112016)

CUSEDINVESTING

PowerofallocaoninWealthCreaon

HIGHLIGHTS
Stockallocaon(howmuchtobuy)isapowerfultoolforporolio
performance,butisunderresearchedvisvisstockselecon(whattobuy)
Kelly'sformulaoers3insightsforequityinvesng:(1)Lookforasymmetric
payo(2)Createedge(3)Betbig
Opportuniesforbigbetscomeseldom;FocusedInvesngisasoundstrategy
tocapitalizeonthem
KeystosuccessfulFocusedInvesngare:(1)Clearporoliogoal(2)Superior
stockselecon(3)Raonalallocaon(4)Acvemonitoring
Disciplinedpracceshouldleadtoexceponalreturnsratherthan
acceptablereturns
"Betseldom,andonlywhentheoddsarestronglyinyourfavor,butwhenyoudo,bet
big,holdforthelongterm,andcontrolyourdownsiderisk."
Fromthebook

ConcentratedInvesng,

byAllanCBenello,MichaelVanBiema,TobiasECarlisle

TOP10WEALTHCREATORS(20112016)
THEBIGGEST

THEFASTEST

THEMOSTCONSISTENT

Wealth
RankCompany

Created

5Year
Company

Price

(INRb)

Appeared
Company

CAGR(%)

inWC
Study(x)

10Year
Price
CAGR(%)

TCS

2,637

AjantaPharma

121

AsianPaints

10

30

2
3

HDFCBank
HindustanUnilever

1,475
1,266

WelspunIndia
EicherMotors

88
70

KotakMahindraBank
SunPharma

10
10

26
25

ITC

1,197

KajariaCeramics

66

TitanCompany

10

23

5
6

SunPharma
Infosys

1,169
948

VakrangeeSoware
BajajFinance

63
59

Bosch
HDFCBank

10
10

22
21

7
8

HCLTechnologies
KotakMahindraBank

819
760

PIIndustries
Symphony

58
56

AxisBank
DaburIndia

10
10

20
20

9
10

MaruSuzuki
HDFC

742
682

AmaraRajaBaeries
AurobindoPharma

56
50

NestleIndia
CumminsIndia

10
10

17
17

RaamdeoAgrawal

(Raamdeo@MolalOswal.com)/

ShrinathMithanthaya

(ShrinathM@MolalOswal.com)

WethankMrDhruvMehta(Dhruv.Mehta@dhruvmehta.in),InvestmentConsultant,forhisinvaluablecontribuontothisreport.
4

InvestorsareadvisedtoreferthroughimportantdisclosuresmadeattheendoftheResearchReport.

21stAnnualWealthCreaonStudy(20112016)

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

1/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

MolalOswal21stAnnualWealthCreaonStudy
Page

WealthCreaonStudy:Objecve,Concept&Methodology
WealthCreaon201116:FindingsSummary
Theme2017:FocusedInvesng

.......................1

............................................23

................................................................419

WealthCreaon201116:DetailedFindings

.........................................2033

Appendix1:MOSL100BiggestWealthCreators

................................3435

Appendix2:MOSL100FastestWealthCreators

................................3637

Appendix3:MOSL100WealthCreators(alphabecal)

..........................38

AbbreviaonsandTermsusedinthisreport
Abbreviaon/Term
2006,2011,2016,etc

Descripon
ReferencetoyearsforIndiaarenancialyearendingMarch,unlessotherwisestated

Avg

Average

CAGR

CompoundAnnualGrowthRate

LtoP/PtoL

LosstoProt/ProttoLoss.Insuchcases,calculaonofPATCAGRisnotpossible

INRb

IndianRupeesinbillion

PriceCAGR

Inthecaseofaggregates,PriceCAGRreferstoMarketCapCAGR

WC

WealthCreated

WealthCreated

IncreaseinMarketCapitalizaonoverthelast5years,dulyadjustedforcorporate
eventssuchasfreshequityissuance,mergers,demergers,sharebuybacks,etc.

Note: Capitalinedatabasehasbeenusedforthisstudy.SourceofallexhibitsisMOSLanalysis,unlessotherwisestated

21stAnnualWealthCreaonStudy(20112016)

WealthCreaonStudy
Objecve,Concept&Methodology
Objecve
ThefoundaonofWealthCreaonistobuybusinessesatapricesubstanallylowerthantheir
"intrinsicvalue"or"expectedvalue".Thelowerthemarketvaluecomparedtotheintrinsic
value,thehigheristhemarginofsafety.Everyyearforthepast21years,weendeavortocull
outthecharacteriscsofbusinessesthatcreatevaluefortheirshareholders.
http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

2/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

AsPhilFishersays,"It seemslogicalthatevenbeforethinkingofbuyinganycommonstock,the
rststepistoseehowmoneyhasbeenmostsuccessfullymadeinthepast."
OurWealth
Creaonstudiesareaemptstostudythepastasaguidetothefuture,andgaininsightsinto
thevariousdynamicsofstockmarketinvesng.

Concept&Methodology
WealthCreaonistheprocessbywhichacompanyenhancesthemarketvalueofthecapital
entrustedtoitbyitsshareholders.Itisabasicmeasureofsuccessforanycommercialventure.
Forlistedcompanies,wedeneWealthCreatedasthedierenceinmarketcapitalizaonover
aperiodoflastveyears,aeradjusngforequitydiluon.
Werankthetop100companiesindescendingorderofabsoluteWealthCreated,
subjecttothe
company'sstockpriceatleastoutperformingthebenchmarkindex(BSESensexinourcase).
Thesetop100WealthCreatorsarealsorankedaccordingtospeed(i.e.priceCAGRduringthe
periodunderstudy).
Wepresentthestudyhighlightsinpages23.Thedetailedndingsarepresentedinpages
2033.Appendix1(pages3435)ranksthe100WealthCreatorsbysize,andAppendix2(pages
3637)ranksthesame100WealthCreatorsbyspeed.
AthemestudytledFocused

InvesngPowerofallocaoninWealthCreaon

isfeatured

inpages419.

9December2016

21stAnnualWealthCreaonStudy(20112016)

WealthCreaon20112016
Highlights
TCSistheBiggestWealthCreatorforthefourthmeinarow
TCS hasemergedasthebiggestWealthCreatorfortheperiod201116,retainingthetop
spotitheldeveninthepreviousthreestudyperiods(201015,200914and200813).
HDFCBank hasincheduptoNo.2aer3yearsofremainingNo.3.
Exhibit1 Top10BiggestWealthCreators

RankCompany

WealthCreated
INRb%share

CAGR(%)
Price

PAT

P/E(x)

RoE(%)

20162011

20162011

1TCS

2,637

16

22

21

26

37

37

2HDFCBank

1,475

18

26

21

27

17

16

3Hind.Unilever

1,266

25

14

46

30

102

76

4ITC

1,197

13

14

28

28

28

30

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

3/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport
5SunPharma
6Infosys

1,169
948

4
3

30
9

24
15

38
20

26
27

16
24

19
26

7HCLTech

819

28

27

21

20

20

21

8KotakMahindra

760

24

17

36

21

10

14

9MaruSuzuki

742

24

14

25

16

17

16

682

10

18

17

23

20

21

TotalofTop10

11,695

41

18

19

24

25

23

24

TotalofTop100

28,436

100

19

16

22

19

20

22

10HDFC

AjantaPharmaistheFastestWealthCreatoragain
AjantaPharma

hasemergedastheFastestWealthCreatorforthesecondmeinarow,

with201116stockpricemulplierof53x(121%CAGR).
EicherMotors isamongthetop10FastestWealthCreatorsforthelast5studies.
Exhibit2 Top10FastestWealthCreators

RankCompany

PriceAppn.

CAGR(%)

MktCap(INRb)

(x)

Price

PAT

2016

P/E(x)

2011

2016

2011

AjantaPharma

53

121

52

124

31

WelspunIndia

23

88

234

100

14

226

EicherMotors

14

70

48

520

36

42

20

KajariaCeramics

13

66

30

76

33

Vakrangee

11

63

52

105

27

17

BajajFinance

10

59

39

373

26

29

10

PIIndustries

10

58

37

78

25

10

Symphony

56

15

83

77

17

AmaraRajaBaeries

56

27

150

16

31

11

AurobindoPharma

50

28

436

57

22

10

10

AsianPaintsistheMostConsistentWealthCreator
AsianPaints istheMostConsistentWealthCreatorover200616,byvirtueof
1.Appearingamongtop100WealthCreatorsineachofthelast10studies;and
2.Highest10yearPriceCAGRof30%.

9December2016

21stAnnualWealthCreaonStudy(20112016)

Exhibit3 Top10MostConsistentWealthCreators

Rank

Company

Appearedin10yrPrice10yrPAT

P/E(x)

RoE(%)

WCStudy(x)CAGR(%)CAGR(%)

20162006

20162006

AsianPaints

10

30

23

48

29

31

31

2
3

KotakMahindra
SunPharma

10
10

26
25

23
25

36
38

20
30

10
16

24
41

TitanCompany

10

23

24

44

45

20

47

Bosch

10

22

14

53

27

15

24

HDFCBank

10

21

31

21

28

17

16

AxisBank

10

20

33

13

20

16

18

DaburIndia

10

20

19

36

32

30

49

NestleIndia

10

17

11

63

29

32

92

CumminsIndia

10

17

15

32

26

22

23

10

Consumer/RetailisthebiggestWealthCreangsector
Consumer/Retail

hasemergedasIndiasbiggestWealthCreangsectorforthesecond

consecuveme,andthethirdmeinthelastfouryears.
Exhibit4 Consumer/RetailisthetopWealthCreangsector

Sector

WCShareofWC%CAGR1116(%)

P/E(x)

RoE(%)

(Noofcompanies)
Consumer/Retail(23)

(INRb)
6,364

2016
22

2011
8

Price
21

PAT
15

2016
38

2011
30

2016
31

2011
32

Banking/Finance(14)
Technology(7)

4,995
4,960

18
17

24
14

20
16

19
20

19
20

18
24

16
28

19
29

Auto(15)

4,093

14

20

10

20

13

19

32

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

4/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport
Healthcare(15)
Cement(5)

3,705
1,266

13
4

4
1

25
20

18
3

Oil&Gas(3)

670

14

21

CapitalGoods(4)

513

16

Telecom&Media(2)

394

Metals/Mining(2)

289

Ulity(1)

203

Others(9)
Total

30
35

22
16

18
9

18
14

26

10

27

14

11

33

26

17

18

17

19

21

23

13

10

15

11

12

16

17

18

12

18

14

12

984

21

17

25

21

19

19

28,436

100

100

19

16

22

19

20

22

CommoditycollapsedrivesupWealthDestrucon
7ofthetop10WealthDestroyersareinthebusinessofglobalcommodies.
Exhibit5 TopWealthDestroyingcompanies
Company
WealthDestroyed
INRb

Exhibit6 TopWealthDestroyingSectors
Price

%ShareCAGR(%)

MMTC
NMDC

889
735

6
5

47
19

BHEL
ONGC
JindalSteel

730
645
592

5
4
4

23
6
39

Vedanta
StateBankofIndia

570
542

4
4

21
7

NTPC
SAIL
CoalIndia

529
524
348

3
3
2

8
24
3

6,104
15,146

40
100

Totalofabove
TotalWealthDestroyed

Wealth
Destroyed
(INRb)

%
Share

Metals/Mining
Banking&Finance
Ulies

5,058
2,991
1,555

33
20
10

CapitalGoods

1,393

Oil&Gas
Constn./RealEst.
Technology

1,256
1,012
301

8
7
2

Chemicals&Fert.
Telecom

295
214

2
1

1,071
15,146

7
100

Sector

Others
Total

Fordetailedndings,pleaseseepages2033.
9December2016

21stAnnualWealthCreaonStudy(20112016)

Theme2017
http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

5/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

9December2016

21stAnnualWealthCreaonStudy(20112016)

FocusedInvesng
PowerofallocaoninWealthCreaon
Betseldom,andonlywhentheoddsarestronglyinyourfavor,butwhenyoudo,betbig,
holdforthelongterm,andcontrolyourdownsiderisk.
fromthebook

ConcentratedInvesng,

byAllanCBenello,MichaelVanBiema,TobiasECarlisle

1.Backdrop
20studiesonWhattobuy;rstoneonHowmuchtobuy
Twokeyaspectsofequityinvesngare:
muchtobuy

(1)Whattobuy

(i.e.stockselecon),and

(2)How

(i.e.stockallocaonorweightageinagivenporolio).Almostallofthepast20

AnnualWealthCreaonStudieshavecoveredvariousaspectsofwhattobuy.Inthis,the21st
Study,wefocusonhowmuchtobuy.
Thesimpliscexampleofahypothecalporoliopresentedbelowshowshowstockallocaon
cansignicantlyinuenceinvestmentperformance.Forthesamesetofstocks,3porolioswith
dierentallocaonsturnintotalreturnrangingfromaslowas8.5%toashighas+18.5%.
Exhibit1

Porolioswiththesamestockscanturninwidelydierentreturnsbasedonallocaon
Stock

Allocaon

PoroliolevelReturn

Stock1

Return
50%

PorolioA
10%

PorolioB
20%

PorolioC
5%

Stock2
Stock3

40%
30%

10%
10%

15%
15%

5%
5%

4.0%
3.0%

6.0%
4.5%

2.0%
1.5%

Stock4
Stock5
Stock6

20%
10%
0%

10%
10%
10%

10%
10%
10%

5%
10%
10%

2.0%
1.0%
0.0%

2.0%
1.0%
0.0%

1.0%
1.0%
0.0%

Stock7

10%

10%

5%

10%

1.0%

0.5%

1.0%

Stock8

20%

10%

5%

15%

2.0%

1.0%

3.0%

Stock9
30%
Stock1040%

10%
10%

5%
5%

15%
20%

3.0%
4.0%

1.5%
2.0%

4.5%
8.0%

100%

100%

100%

5.0%

18.5%

8.5%

PorolioTotal

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

PorolioAPorolioBPorolioC
5.0%
10.0%
2.5%

6/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

Despitetheabovephenomenon,wearesurprisedtodiscoverhowlileliteraturethereison
thiscricalaspectofinvesng.Academicianstendtobelievethatstockallocaon,evenmore
thanstockselecon,bordersonartratherthanscience,andhence,itdependstoagreatextent
onthetemperamentandstyleofindividualinvestmentpraconers.Investmentpraconers,
ingeneral,seempronetoallocatestocksmorebyintuionandemoonthanreason.
Inthisstudy,weoersomeinsightsonallocaon,andsuggestaraonalapproachforthe
same.Inthefollowingsecons

Werstanalyzetheonlysemblanceofaframeworkforallocaon

Kellysformula

and

derivefromitinsightsforequityinvesng.

9December2016

21stAnnualWealthCreaonStudy(20112016)

Next,wesuggestthatthepowerofallocaonisbestexploitedthrough

FocusedInvesng,

whichessenallyinvolvesplacingsizablebetson1520stockstogenerateexceponal
(ratherthanacceptable)returnsoverthelongterm.

Finally,wediscussthe

4keystosuccessfulFocusedInvesng,

eachfor
1.WhattobuyQGLP
2.HowmuchtobuyCAP

incorporangaframework

(Quality,Growth,LongevityatfavorablePrice),and
(CondenceAdjustedPayo).

2.Kellysformulainsightsforequityinvesng
Lookforasymmetricpayo,Createedge,Betbig
Inthemid1950s,JohnLarryKellyJr,ascienstwithBellLabs,developedaformulaforan
opmalbetsizeonawagerwithgivenpayos(i.e.odds)andwinlossprobabilies.The
formulaisasunder:

f=(bpq)b
where: f isthefraconofthecurrentbankrolltowager,
b isthenetodds(expressedasrupeestobewonforeveryrupeebet)orwinlossrao,
p istheprobabilityofwinning,and
q istheprobabilityoflosing.
Bengthisfraconrepeatedlymaximizesthelongtermgrowthofthebankroll.
Example:

Youareoereda100rupeebetthateverymeacoinistossedandyoucall
headsortailscorrectly,youwillwin200rupees.Youhavesetaside1,000rupees
foraseriesofbets.Whatshouldbeyourbengstrategy?
Here,b(odds)=200100=2.Givenafaircoin,thechancesofcorrectlycalling
headsortailsis1in2i.e.50%.Thus,p(probabilityofwin)is50%andq
(probabilityofloss)is50%.Withthis,theKellyfraconworksoutto25%asunder:

f=(2x0.50.5)2=25%
Thus,youwillbet25%of1,000,i.e.250rupeesinyourrstbet.Thesubsequent
betsizeisdependentontheoutcomeofyourrstbet:

Ifyouwin,yourbankrollgrowsto1,200rupees,andyournextbetsizeshould
be25%of1,200,i.e.300rupees.

Ifyoulose,yourbankrollfallsto900rupees,andyournextbetsizeshouldbe
25%of900,i.e.225rupees.

Foralongenoughseriesofbets,thisstrategywillmaximizethegrowthinyour
http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

7/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

bankroll.

9December2016

21stAnnualWealthCreaonStudy(20112016)

2.1Kellysforequies:Themeaningismorerelevantthanthemath
Equityinvesngisstarklydierentfromgamblinginseveralways.

Odds/PayoandWinlossprobabilies:

Ingambling,boththeodds/payoandthewin

lossprobabiliesareagiven.Inmanysituaons,payois1:1andwinlossprobabilityis
0.5:0.5.Incaseslikerouleewherethepayoishigher,theprobabilityofwinisthatmuch
lower.Netnet,winorlossispurelyanoutcomeofluck.
Incontrast,inequityinvesng,neitherpayonorprobabilityisxed.Stockpricesare
known,buteveryinvestorhastoindividuallyesmateupsidedownsideandassociated
probabilies.Investorswithsuperiorknowledge,skillsandprocessescanidenfyfavorable
payowithfavorableprobabiliestowinbig.
Exhibit2

ProcessOutcomematrix:Inequityinvesng,havingagoodprocessreducestheroleofluck

Good

Goodluck

Deservedsuccess

Logicaloutcome

Badluck

OUTCOME

Bad

Bad

Good
PROCESS

Roleofme:

Ingambling,theoutcomeofonesbetwinorlossisinstantaneous.In

equies,thereissignicantmegapbeforeitcanbedecidedwhetherthebetwasawinor
aloss.

Natureofbets:

Ingambling,betsaresequenal.Theoutcomeofonebetcaninuencethe

strategyforthenextbet.Inequies,investorsneedtomakesimultaneousbetsonmulple
stocks.
Giventhesedierences,themathemacalrelevanceofKellyisnotveryhighinequies.And
yet,twovariantsoftheKellysformulaoermeaningfulinsightsforequityinvesng.

2.1.1Insight#1:Lookforasymmetricpayo
OnevariantofKellysformulacanbeobtainedwithasuitablemodicaonofb,i.e.odds.In
gambling,oddsaretypicallyquotedasb:1,i.e.brupeestobewonforevery1rupeebet.In
9December2016

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

8/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

21stAnnualWealthCreaonStudy(20112016)

gambling,ifoneloses,thelossisalways100%oftheamountwagered.Suchisnotthecasein
equies,whereevenifthereisaloss,itisrarely100%(exceptincaseofbankruptcy).
Thus,forequies,itisbeertointerpretbasupsidedownsiderao,say,U/D.Substung
b=U/DinKellysformula,weget:

f=(U/Dxpq)(U/D)
Thissimpliesto:

f=(UpDq)U
where: f isthefraconofthecurrentbankrolltoinvestinastock,
U isthepossibleUpsideinthestock,
p istheprobabilityofsuchUpside,
D isthepossibleDownsideinthestock,and
q istheprobabilityofsuchDownside.
Thisvariantclearlyidenesthefactorsthatshouldinuencestockseleconandallocaon
Upside,Downsideandtheprobabiliesofboth.Themostfavorablesituaoninvestorsshould
lookforis:Asymmetricpayo(highupsidelowdownside)coupledwithhighprobabilityofwin.

2.1.2Insight#2:Createedge
YetanothervariantofKellyisbyauthorWilliamPoundstoneinhisbook,

FortunesFormula

f=edge/odds
where: f isthefraconofthecurrentbankrolltoinvestinastock,
edge =bpqorUpDq,i.e.theexpectedvalueofthenancialproposion,and
odds =borU,i.e.theamountexpectedtowinifonewins.
Thisvariantcanbeinterpretedbothmathemacallyandnonmathemacally.Mathemacally,f
isposiveonlywhenthenumerator(edgeorexpectedvalue)isgreaterthanzero,i.e.noedge,
nobet.Innonmathemacalterms,edgemaybedenedasknowingsomethingthatothers
dont.So,hereagain:noedge,nobet.
Asmarketsarefairlyecient,equityinvestorscanexpecttomakebigmoneyonlyiftheycreate
anedgeoverthemarket.Therearetwosourcesofedge:(1)Informaonadvantage,and(2)
Analycaladvantage.Inmoderndaymarkets,investorsareunlikelytoenjoyanysignicant
informaonadvantage.Hence,themainsourceofcreanganedgeisanalycaladvantage.This
primarilyincludesmetestedframeworks/processesforanalyzingvariousaspectsofbusiness
andvaluaonnatureofindustry,compevelandscape,sizeofopportunity,qualityof
management,channelchecks,earningsforecasts,peervaluaon,etc.

2.1.3Insight#3:Betbig
Wheneverinvestorsgetanedgeinasymmetricpayosituaons,theKellymessageisclear:bet
big.
Suchopportuniesforbigbetscomeseldom;hencetheneedforFocusedInvesng.

9December2016

21stAnnualWealthCreaonStudy(20112016)

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

9/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport
Exhibit3 Thepayoedgedecisionmatrix

High

SpeculaveBet

BetBig

Low

NoBet

BetLow

PAYOFF

No

Yes
EDGE

3.WhatisFocusedInvesng?
ThegoldenmeanofDiversiedandConcentratedInvesng
Anextremelyimportantaspectofinvesngisriskreturntradeo.Therearetwocontrasng
investmentstylesaroundthis:(1)Diversiedinvesng,and(2)Concentratedinvesng.

3.1Diversiedinvesng
Theunderlyingstrategyindiversiedinvesngistoholdafairlylargenumberofstocksacross
manysectorssothatunexpectedadversityinanystockorsectordoesnotundulyhurtoverall
porolioperformance.
Intheacveversionofdiversiedinvesng,poroliomanagersconstantlybuyandsellstocks,
aempngtooutperformthebroadermarket,measuredbybenchmarkindicessuchasNiy
50,BSESensex,Niy500,etc.Thisinvolvesahighleveloftransaconandmanagementcosts,
leadingtotheemergenceofanalternaveapproachIndexInvesnginthemid1980s.Here,
poroliomanagersfollowarelavelypassivebuyandholdstrategyoftheverystocksthat
constutethebenchmarkindices.Thecoreideaistoperformbeerthantheacvelymanaged
fundsbykeepingcostsverylow.
modestreturns,

Thenetresultofbothversionsofdiversiedinvesngisthesame

typically

hoveringaroundthemarketaverage.Thus,thefullypowerofequitytodeliverexponenal
returnsremainsunharnessed.

9December2016

21stAnnualWealthCreaonStudy(20112016)

Exhibit4 AnnualReturnforMonteCarlosimulaonporoliosinS&PEqualWeightIndex(1999to

2014):Higherthenumberofstocks,lowerthestandarddeviaon,andalsolowerthemaximumreturn
Returns%

Stocksinporolio

All

Average

10
12.0

15
12.1

20
12.1

25
12.1

30
12.1

50
12.2

100
12.2

250Stocks
12.2
12.2

Minimum
Maximum

3.7
21.3

5.4
20.0

5.3
18.7

5.9
17.2

7.5
17.3

8.1
15.8

10.1
14.8

10.7
13.5

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

12.2
12.2

10/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport
StdDeviaon
2.7
2.2ConcentratedInvesng,
1.9
1.7
Source:
Adaptedfromthebook

1.5
1.2
0.8
0.4
byAllanCBenello,MichaelVanBiemaand

0.0

TobiasCarlisle

3.2Concentratedinvesng
PropagatedbyahandfulofinvestorslikeJohnKeynes,WarrenBue,CharlieMungerandPhil
Fisher,ConcentratedInvesngessenallyinvolveschoosingahandfulofstocks(typicallynot
morethan10)thatareexpectedtoproduceaboveaveragereturns,allocangabulkofthe
poroliotothesestocks,andholdingthemforthelongtermacrossmarketcyclesand
uctuaons.
Concentratedinvestorsbelievethattheirindepthknowledgeofthebusinessestheybuyinto
CommonStocks,UncommonProts,
trulyreducestheriskofowningthem.Inhisbook,

Phil

Fisherwrites,buyingacompanywithoutsucientknowledgeofitmaybeevenmore
dangerousthanhavinginadequatediversicaon.Bueswordsinthisregardare,
Diversicaonservesasaproteconagainstignorance.Ityouwanttomakesurethatnothing
badhappenstoyourelavetothemarket,youshouldowneverything.Thereisnothingwrong
withthat.Itsaperfectlysoundapproachforsomebodywhodoesntknowhowtoanalyze
businesses.
Concentratedinvestorsindeedtendtooutperformthemarketsignicantlyoverthelongterm,
butwithrelavelyhighyeartoyearvolality.
Exhibit5 CharlieMungersperformance

Exhibit6 butBuesperformance(under

suggestssomelevelofannualvolality
%
ReturnS&P500
Alpha

BuePartnerships)isimpeccable
%
Return
Dow

Alpha

1962
1963

30.1
71.7

7.6
20.6

37.7
51.1

1957
1958

9.3
32.2

8.4
38.5

17.7
6.3

1964
1965

49.7
8.4

18.7
14.2

31.0
5.8

1959
1960

20.9
18.6

20.0
6.2

0.9
24.8

1966
1967

12.4
56.2

15.8
19.0

28.2
37.2

1961
1962

35.9
11.9

22.4
7.6

13.5
19.5

1968

40.4

7.7

32.7

1963

30.5

20.6

9.9

1969
1970

28.3
0.1

11.6
8.7

39.9
8.8

1964
1965

22.3
36.9

18.7
14.2

3.6
22.7

1971

25.4

9.8

15.6

1966

16.8

15.6

32.4

1972
1973

8.3
31.9

18.2
13.1

9.9
18.8

1967
1968

28.4
45.6

19.0
7.7

9.4
37.9

1974

31.5

23.1

8.4

CAGR

25.3

4.9

20.4

1975

73.2

44.4

28.8

Source:Buesleerstopartners

CAGR

19.8

4.9

14.9

Source:Adaptedfromthebook,ConcentratedInvesng

9December2016

10

21stAnnualWealthCreaonStudy(20112016)

3.3Diversiedv/sConcentratedInvesngandthenatureofcapital
Thenatureofcapitalbeingmanagedseemstobeakeydeterminantastowhichofthetwo
stylesofinvesngwillbepracced.Publicmoney,largelyintheformofopenendedmutual
funds,tendstobemanagedbasedonaDiversiedInvesngstrategy,whereasConcentrated
Invesngseemsbeersuitedforprivate/closeendedsourceofcapital.
Theobviousreasonisthatpublicmoneytendstobeckleandguidedmorebyshortterm
performance.Anopenendedmutualfundwithapoorshorttermperformancefacesthevery
realprospectofarunonitsassets.This,inturn,makessuchporoliomanagersaversetoshort
termvolalitythattypicallyaccompaniesconcentratedstockposionstheyseleforsafer
butlowerreturns,instead.

3.4FocusedInvesng:Thegoldenmean
http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

11/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

WepositFocusedInvesngasthegoldenmeanoftheabovetwoinvestmentstyles.Compared
to50+stocksunderDiversiedInvesngand10orfewerstocksunderConcentratedInvesng,
werecommendafocusedporolioof1520stocks.Thisoersthebestofbothworlds
adequateriskdiversicaonandmeaningfulreturnmagnicaon.
Ontheriskfront,severalstudieshaveestablishedthatcompanyspecicrisksaresuciently
diversiedbyowning1520stocksacrosssectors(depictedinExhibit6).Addionalprudent
allocaonnorms(e.g.nothavingmorethan10%underanysinglestock)canfurtherreduce
volalityofperformance.
Exhibit7 1520stocksfromacrosssectorsaresucienttonearfullydiversifycompanyspecicrisks

Total

Focused
Invesng

Companyspecicrisk

Risk

Systemac/Marketrisk

No.ofstocks

Onthereturnfront,havingonly1520businessesallowsmeaningfulallocaonsinhigh
conviconstockideas,magnifyingoverallporolioreturn.Aninteresng2012studyintheUS
showedthatporoliosconsisngofonlythehighconviconbetsoffundmanagers
outperformedtheveryfundfromwhichtheywerederived,andthattoowithoutsignicantly
higherrisk/volality.

9December2016

11

21stAnnualWealthCreaonStudy(20112016)

Exhibit8 Poroliosofhighconviconstocksoutperformed

theveryporoliosfromwhichtheywerecarvedout
Porolios

Return%*

StdDev.%

Top5

10.8

26.3

Top10

9.4

23.4

Top15

8.7

21.8

Top20

8.1

20.7

Top25

7.8

19.8

Top30

7.4

19.1

AllFunds

6.3

19.5

5.1

20.0

OwnIndex
*1999to2009
Source:Workingpaper

DiversicaonversusConcentraonandtheWinneris?

(Yeungetal2012)

3.5Diversiedv/sFocusedInvesngTheIndianscenario
TheIndianmutualfundindustryhasabout286schemesacvelymanagingINR4trillionin
assets.Diversiedinvesngisclearlythedominantstyle.Ahigh56%oftheschemesandan
evenhigher86%ofassetsareunderporolioswith41+stocks.Incontrast,only13%ofthe
schemesand3%oftheassetsareunderporoliosof25stocksorfewer.

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

12/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport
Exhibit9

Only36Focusedporolios.

No.ofmutualfundschemesTotal286

Exhibit10

managingINR139billion

AUMTotalINR4trillion

Upto25stocks
13%
41+stocks
56%

Upto25stocks
3%

41+stocks
84%
2640stocks
31%

2640stocks
13%

Source:BasedonmutualfunddatafromICRAOnline

4.FourkeystosuccessfulFocusedInvesng
Poroliogoal,Selecon,Allocaon,Monitoring&Improvement
Webelievethereare4keystosuccessfulFocusedInvesng:
1.Clearporoliogoal,
2.Superiorstockselecon,
3.Raonalallocaon,and
4.Acvemonitoringandimprovement.
Wediscussthesebelow,incorporangaframeworkeachfor

WhattobuyQGLP

HowmuchtobuyCAP

(Quality,Growth,LongevityatfavorablePrice),and
(CondenceAdjustedPayo).

9December2016

12

21stAnnualWealthCreaonStudy(20112016)

4.1Clearporoliogoal
Webelievesengasimple,clearandmeasurableporoliogoalshouldbethestarngpointof
anyinvesngprocess.Aporoliogoalcanbeexpressedintermsofabsoluteperformanceor
relavetoasuitablebenchmark.ForFocusedInvesng,anabsoluteperformancegoalis
preferred.Theporoliogoalwillserveasausefulguidepostforbothstockseleconandstock
allocaon.

4.2SuperiorstockseleconQGLP
Havingdecidedontheporoliogoal,thenextstepissuperiorstockselecon.InFocused
Invesng,thisisofutmostimportance,asinaporolioof1520stocks,averageallocaonin
eachstockismeaningfulenoughtoinuenceporolioperformance.So,investorsarebeero
usingametestedinvestmentphilosophy/processofstockselecon.Theendobjecveisto

Findasymmetricpayo(i.e.highupsidepotenalwithlowdownsiderisk),

Createedge(i.e.haveaninformaonand/oranalycaladvantageoverthemarket),

Meetporoliogoal,and

Diversifyrisk(i.e.selectstocksfromdierentsectors,nothighlycorrelatedtoeachother).

Formostselecons,werecommendaphilosophycapturedbytheacronym
Q QualityofbusinessandQualityofmanagement,

QGLP

G Growthinearnings,
L LongevityofQuality&Growth,and
P favorablePriceofpurchase.

4.2.1Q=QualityofbusinessxQualityofmanagement
ExpressingQualityasaproductimpliesthatifeitherQualityofBusinessorQualityof
Managementiszero,overallQendsupaszero.
http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

13/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport
Exhibit11

KeyindicatorsofQ

QualityofBusiness

QualityofManagement

Unquesonableintegrity

Preferablysecularbusiness

Largeprotpool

Impeccablecorporategovernance

Sizeofopportunity

Concernforallstakeholders

Compevelandscape

Preferablypayingfulltaxand
awellarculateddividendpolicy

Monopoly,Oligopoly
Dominantmarketshare

Niche/Strategicopportunity

Favorabledemandsupply
(especiallyincaseofcommodies)

RoEandRoCE

OperangcashowandFreecashow

Demonstrablecompetence
Excellenceinstrategy&execuon
Sustainingcompeveadvantage

Growthmindset
Longrangeprotoutlook
Ecientcapitalallocaon

ClearingtheQualityltersignicantlylowersriskofpermanentcapitalloss.

9December2016

13

21stAnnualWealthCreaonStudy(20112016)

4.2.2G=Growthinearnings
Growthinearningsisakeydriverofvalueinastock.However,growthisuniquetoeach
company,andhence,doesnotyielditselftoanystandardframeworks.Certainfavorablehigh
growthsituaonsinclude

ExponenalopportunityindiscreonaryexpenditureamidstlineargrowthinGDP

ValueMigraon(fromoutdatedbusinessmodelstonewones,e.g.wiredtelephonyto
wireless)

Sustainedindustrytailwind

Smallbasewithlargeopportunity

Newlargeinvestmentgengcommissioned

InorganicgrowththroughM&A

Consolidaonofcompeon

Operang&Financialleverage

Turnaroundfromlosstoprot

4.2.3L=LongevityofQuality&Growth
AsFocusedInvesngisessenallyabuyandholdstrategy,selectedstocksshouldideally
sustaintheirqualityandgrowthforalongmeintothefuture.

4.2.4P=Price(favorable)
AthoroughanalysisofQGLwilllikelygiveinvestorsanedgeintermsofunderstandingthe
companysbusiness,managementanditsearningsgrowthprospects.However,itisvaluaon
analysisthatwillnallyhelpinvestorsdeterminewhetherthestockmeetstheporoliogoal,
anddecidewhetheritmeritsselecon.

4.3RaonalallocaonCAP
Havingselected1520stocks,mostofwhichmeettheporoliogoal,thenextstepisraonal
allocaonofthesameinaporolio.Thegoverningprincipleshereare

Betbigwhenoddsarestronglyinfavor,andatthesameme,

Increasethecertaintyofachievingtheporoliogoal.

Toachieveboththeseobjecves,wesuggesttheframework
http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

CAP(CondenceAdjusted
14/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

Payo). ThisframeworkdrawsinspiraonfromtheallocaonmethodologypursuedbyWarren
BueinmanagingtheinvestmentporolioatBuePartnershipsduringthe1960s.Hesays,
Thequesonalwaysis,HowmuchdoIputinnumberone(rankedbyexpectaonofrelave
performance)andhowmuchdoIputinnumbereight?"(seeAnnexureforafullerextractfrom
his1966leertopartnersondiversicaonandallocaon).
ThestepsforCAPbasedallocaonare:

Rankalltheselectedstocksindescendingorderoftheirexpected3or5yearupside.

Tothisupside,applyaCondencefactorrangefrom0to100%.Themainideabehindthe
Condencefactoristodeatetheexpectedupsideforrisksthatmaynothavebeen
explicitlycapturedintheupsidecalculaons.(Note:IftheCondencefactorisverylow,
perhapstheveryseleconmayneedtobequesoned.)

Foreachstock,arriveatCondenceAdjustedPayo(CAP)i.e.UpsidexCondencefactor.

RankthestocksindescendingorderofCAP,andalignthenalallocaon.

9December2016

14

21stAnnualWealthCreaonStudy(20112016)

ThemoreaccuratetheassessmentofCAP,thehigherwillbetheporolioperformancebased
onthisallocaon,ratherthananyother(e.g.equalweight).
Addionalnormscouldinclude

nothavinganystockwithallocaonmorethan10%oftheporoliovalue

nothavinganystockwithallocaonlessthan3%oftheporoliovalue

nothavingmorethan5%equityofanycompany

4.4Acvemonitoring&improvement
Havingconstructedtheporolio,thenextstepisacvemonitoringandimprovement.Thisis
veryimportant,asoddsonstockschangefrequentlyduetochangeinunderlyingfundamentals,
orstockprice,orboth.
Monitoringandimprovementincludesseveralthingssuchas

esmangquarterlyandannualearningsforcompaniesintheporolioandreviewingthe
actualsvisvisesmatestoascertainwhethertheoriginalinvestmentthesisisontrack

stayingupdatedonthelatestdevelopmentsinthecompanyandsector,includingperiodic
interaconwithcompanymanagement
maintainingcorroboraveevidenceonthecompanywhereverpossible,e.g.viainteracons

withcompetors,dealers,customers,suppliers,exemployees,etc

watchingoutforirraonalstockpricemovements,upordown,andanappropriateacon
planforsuchcases

constantsearchforinvestmentideasthatmaybesuperiortotheonescurrentlyheld.

4.5Commonmistakesofallocaon
Thethreecommonmistakesofallocaontobeavoidedare:(1)overallocaon,(2)under
allocaon,and(3)overstayingwithwinnersandlosers.Thesemistakescanbeassociatedwith
commonpsychological/behavioralbiasesasshownbelow.
Exhibit12

Allocaonmistakescanbetracedtopsychological/behavioralbiases

Allocaonmistake

Underallocaon

Associatedbiases

Riskaversion:

Peopleprefertoavoidorminimizeuncertainty,

evenatthecostoflowerpayo.

Overallocaon

Overcondencebias:

Peopleingeneraloveresmatetheir

knowledgeandskills.

Conrmaonbias:

Peopletendtosearchforandinterpret

informaoninawaythatconrmsone'spreexisngbeliefsor
hypotheses,whiledisregardingcontraryinformaonand
alternavepossibilies.
Boththesebiasescombinedareapotentrecipeforoverallocaon.

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

15/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

Overstayingwithwinners

Ownershipbias:

Simplystated,thisisthetendencyto

overvaluewhatyouownsimplybecauseyouownit.

Overstayingwithlosers

Lossaversion:

Peoplefeeltwiceasbadaboutlosingmoneyas

theyfeelaboutwinningit.Thiscausesinvestorstoholdonto
badchoicesfartoolong,hopingthatthingswilleventually
improveandthelosswillbeavoided.

9December2016

15

21stAnnualWealthCreaonStudy(20112016)

5.Summary&conclusions
AdoptFocusedInvesngforexceponalratherthanacceptablereturns
Inclosing,wehighlightthefollowingpointsfromthethemestudy

Theprimefocusofmostinvestorsisstockselecon.Inthis,thepowerofstockallocaonto
enhanceporolioperformanceremainsuntapped.

Kellysformulaoersasemblanceofaframeworkforporoliosizing.However,itissuited
forgamblingsituaonswherepayosandprobabiliesareagiven.Forequityinvesng,the
takeawaysfromanalyzingKellyare
1.Lookforstockswithasymmetricpayoi.e.highupsidepotenalwithlowdownsiderisk
2.Createedgei.e.haveaninformaonand/oranalycaladvantageoverthemarket
3.Whenboth(1)and(2)coincide,betbig.

Asstocksmarketsarefairlyecient,opportuniesforsuchbigbetscomeseldom.Focused
invesngisasoundstrategytocapitalizeontheseopportunies.Byinvesngin1520
stockswithstronglyfavorableodds,investorscanenjoythegoldenmeanofrisk
diversicaonandreturnmagnicaon.

Webelievethereare4keystosuccessfulFocusedInvesng:
1.

Clearporoliogoal,whichsetsaguidepostforbothstockseleconandallocaon

2.
3.
4.

Superiorstockseleconbasedonametestedinvestmentphilosophyorprocess
Raonalallocaon
Acvemonitoringandimprovement.

Disciplinedpracceoftheaboveshouldleadtoexceponalreturnsratherthanacceptable
returns.

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

16/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport
9December2016

16

21stAnnualWealthCreaonStudy(20112016)

ANNEXURE:WarrenBueondiversicaonandallocaon
(extractfromleerdated20January1966topartnersinBuePartnershipLimited;
keyseconsarehighlightedinboldbyus)
Diversicaon
Lastyearincommenngontheinabilityoftheoverwhelmingmajorityofinvestmentmanagers
toachieveperformancesuperiortothatofpurechance,Iascribeditprimarilytotheproductof:
"(1)groupdecisionsmyperhapsjaundicedviewisthatitisclosetoimpossibleforoutstanding
investmentmanagementtocomefromagroupofanysizewithallparesreallyparcipangin
decisions;(2)adesiretoconformtothepoliciesand(toanextent)theporoliosofotherlarge
wellregardedorganizaons;(3)aninstuonalframeworkwherebyaverageis"safe"andthe
personalrewardsforindependentaconareinnowaycommensuratewiththegeneralrisk
aachedtosuchacon;(4)anadherencetocertaindiversicaonpracceswhichare
irraonal;andnallyandimportantly,(5)inera.
ThisyearinthematerialwhichwentoutinNovember,Ispecicallycalledyouraenontoa
newGroundRulereading,
7. Wediversifysubstanallylessthanmostinvestment
operaons.Wemightinvestupto40%ofournetworthinasinglesecurityundercondions
couplinganextremelyhighprobabilitythatourfactsandreasoningarecorrectwithavery
lowprobabilitythatanythingcoulddrascallychangetheunderlyingvalueofthe
investment.
Weareobviouslyfollowingapolicyregardingdiversicaonwhichdiersmarkedlyfromthatof
praccallyallpublicinvestmentoperaons.Frankly,thereisnothingIwouldlikebeerthanto
have50dierentinvestmentopportunies,allofwhichhaveamathemacalexpectaon(this
termreectstherangeofallpossiblerelaveperformances,includingnegaveones,adjusted
fortheprobabilityofeachnoyawning,please)ofachievingperformancesurpassingtheDow
by,say,15percentagepointsperannum.Ifthe50individualexpectaonswerenot
intercorelated(whathappenstooneisassociatedwithwhathappenstotheother)Icouldput
2%ofourcapitalintoeachoneandsitbackwithaveryhighdegreeofcertaintythatouroverall
resultswouldbeveryclosetosucha15percentagepointadvantage.
Itdoesn'tworkthatway.
Wehavetoworkextremelyhardtondjustaveryfewaracveinvestmentsituaons.Sucha
situaonbydenionisonewheremyexpectaon(denedasabove)ofperformanceis
atleast10percentagepointsperannumsuperiortotheDow.

Amongthefewwedond,the

expectaonsvarysubstanally.Thequesonalwaysis,HowmuchdoIputinnumberone
(rankedbyexpectaonofrelaveperformance)andhowmuchdoIputinnumbereight?"This
dependstoagreatdegreeonthewidenessofthespreadbetweenthemathemacal
expectaonofnumberoneversusnumbereight.Italsodependsupontheprobabilitythat
numberonecouldturninareallypoorrelaveperformance.
Twosecuriescouldhaveequal
mathemacalexpectaons,butonemighthave.05chanceofperforming15percentage
pointsormoreworsethantheDow,andthesecondmighthaveonly.01chanceofsuch
performance.Thewiderrangeofexpectaonintherstcasereducesthedesirabilityof
heavyconcentraoninit.
9December2016

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

17

17/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport
21stAnnualWealthCreaonStudy(20112016)

Theabovemaymakethewholeoperaonsoundveryprecise.Itisn't.Nevertheless,our
businessisthatofascertainingfactsandthenapplyingexperienceandreasontosuchfactsto
reachexpectaons.Impreciseandemoonallyinuencedasouraemptsmaybe,thatiswhat
thebusinessisallabout.Theresultsofmanyyearsofdecisionmakinginsecurieswill
demonstratehowwellyouaredoingonmakingsuchcalculaonswhetheryouconsciously
realizeyouaremakingthecalculaonsornot.Ibelievetheinvestoroperatesatadisnct
advantagewhenheisawareofwhatpathhisthoughtprocessisfollowing.
ThereisonethingofwhichIcanassureyou.

Ifgoodperformanceofthefundisevenaminor

objecve,anyporolioencompassingonehundredstocks(whetherthemanagerishandling
onethousanddollarsoronebilliondollars)isnotbeingoperatedlogically.Theaddionofthe
onehundredthstocksimplycan'treducethepotenalvarianceinporolioperformance
sucientlytocompensateforthenegaveeectitsinclusionhasontheoverallporolio
expectaon.
Anyoneowningsuchnumbersofsecuriesaerpresumablystudyingtheirinvestmentmerit
(andIdon'tcarehowpresgioustheirlabels)isfollowingwhatIcallthe
NoahSchoolof
Invesngtwoofeverything.
Suchinvestorsshouldbepilongarks.WhileNoahmayhave
beenacnginaccordwithcertainmetestedbiologicalprinciples,theinvestorshavelethe
trackregardingmathemacalprinciples.(Ionlymadeitthroughplanegeometry,butwithone
excepon,IhavecarefullyscreenedoutthemathemaciansfromourPartnership.)
Ofcourse,thefactthatsomeoneelseisbehavingillogicallyinowningonehundredsecuries
doesn'tproveourcase.Whiletheymaybewronginoverdiversifying,wehavetoarmavely
reasonthroughaproperdiversicaonpolicyintermsofourobjecves.
Theopmumporoliodependsonthevariousexpectaonsofchoicesavailableandthedegree
ofvarianceinperformancewhichistolerable.Thegreaterthenumberofselecons,theless
willbetheaverageyeartoyearvariaoninactualversusexpectedresults.Also,thelowerwill
betheexpectedresults,assumingdierentchoiceshavedierentexpectaonsofperformance.
Iamwillingtogiveupquiteabitintermsoflevelingofyeartoyearresults(rememberwhenI
talkofresults,IamtalkingofperformancerelavetotheDow)inordertoachievebeer
overalllongtermperformance.Simplystated,thismeans

Iamwillingtoconcentratequite

heavilyinwhatIbelievetobethebestinvestmentopportuniesrecognizingverywellthat
thismaycauseanoccasionalverysouryearonesomewhatmoresour,probably,thanifI
haddiversiedmore.

Whilethismeansourresultswillbouncearoundmore,Ithinkitalso

meansthatourlongtermmarginofsuperiorityshouldbegreater.

9December2016

18

21stAnnualWealthCreaonStudy(20112016)

SpaceforNotes

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

18/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

9December2016

19

21stAnnualWealthCreaonStudy(20112016)

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

19/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

201116Wealth
CreaonStudy:
Detailedndings

9December2016

20

21stAnnualWealthCreaonStudy(20112016)

#1

TrendinWealthCreaon
INR28.4trillionWealthCreatedduring201116
Thetop100WealthCreatorscreatedINR28.4trillionofwealthduring201116.
ThisisthethirdhighesteverquantumofWealthCreated.
PaceofWealthCreaonishighlycorrelatedtomarketreturns.During201116,paceof
WealthCreaonwasrelavelyslowerat18%CAGRgivenmutedmarketCAGRof5%.
Exhibit1 During201116,WealthCreatedishighdespitemutedmarketperformance

WealthCreatedTrend

(INRtrillion)

34.2
29.4
26.5

25.4

28.4

22.1
14.3

16.3

16.2

18.4

9.7

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

20/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

Exhibit2 201116paceofWealthCreaonlowerinlinewithmarketcondions

(39%)
(30%)
(26%)

PaceofWealthCreaon
(FiguresinbracketsisSensexCAGR)

49%

40%

(18%)

36%

33%

(22%)
26%

(12%)

(12%)

19%

17%

(6%)
19%

(10%)
25%

(4%)

(5%)
18%

17%

KeyTakeaway
Forgetmarkets,thinkstocks
TheabovedataprovesthatWealthCreaonhappensinallkindsofmarketcondions.So,
investorsarebeerofocusingonwhichstockstoinvestin,ratherthanmingthemarkets.
9December2016

21

21stAnnualWealthCreaonStudy(20112016)

#2

TheBiggestWealthCreators
TCSistheBiggestWealthCreatorforthefourthmeinarow
TCS hasemergedasthebiggestWealthCreatorfortheperiod201116,retainingthetop
spotitheldeveninthepreviousthreestudyperiods(201015,200914and200813).
HDFCBank hasincheduptoNo.2aer3yearsofremainingNo.3.
HindustanUnilever and ITC bothclockedPATCAGRof14%.However,theformerhas
pushedbackITCtoNo.4onthebackofmassive50%stockrerangfrom30xto46x.
8ofthetop10WealthCreatorsarethesameasoflastyear.
MaruSuzuki haveenteredthetop10displacing

KotakMahindraBank

and

AxisBank and TataMotors.

Exhibit3 Top10BiggestWealthCreators

RankCompany

WealthCreated

CAGR(%)

RoE(%)
20162011
37
37

2HDFCBank

1,475

18

26

21

27

17

16

3Hind.Unilever

1,266

25

14

46

30

102

76

4ITC

1,197

13

14

28

28

28

30

5SunPharma

1,169

30

24

38

26

16

19

6Infosys

948

15

20

27

24

26

7HCLTech

819

28

27

21

20

20

21

8KotakMahindra

760

24

17

36

21

10

14

9MaruSuzuki

742

24

14

25

16

17

16

682

10

18

17

23

20

21

11,695

41

18

19

24

25

23

24

TotalofTop10

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

PAT
22

P/E(x)

1TCS

10HDFC

Price
16

20162011
21
26

INRb%share
2,637
9

21/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport
TotalofTop100

28,436

100

19

16

22

19

20

22

Exhibit4 TCSisthebiggestWealthCreatorforthefourthyearinarow

TopWealthCreatorsovertheyears

TCS(4)

(INRb)

3,638

RelianceIndustries(5)

3,077

2,637

2,556
ONGC(3)
HindustanUnilever
(HUL)(4)

9173

Wipro

1,247

HUL

1,678
1,065
1,030

Wipro
(2)

1,856

2,284

1,742

1,514

3,458

ITC

1,187

377 383245

262341

KeyTakeaway
HDFCBankpersistentlyrisingupthecharts
HDFCBankisclimbinguptherankchartspurelyledbyearningsgrowth.Infact,during2011
16,itsP/Eactuallyfellfrom27xto21x.Inthelast3studies,TCSsWealthCreatedhasfallen
fromINR3.6trilliontoINR2.6trillion.Incontrast,HDFCBanksWealthCreatedisupfrom
INR1.3trilliontoINR1.5trillion.
9December2016

22

21stAnnualWealthCreaonStudy(20112016)

#3

TheFastestWealthCreators
AjantaPharmaistheFastestWealthCreatoragain
AjantaPharma

hasemergedastheFastestWealthCreatorforthesecondmeinarow,

with201116stockpricemulplierof53x(121%CAGR).
EicherMotors isamongthetop10FastestWealthCreatorsforthelast5studies.
Except Welspun whichisvirtuallyaturnaroundcase,alltheother9FastestWealthCreators
haveseenmassiveP/Ererangonthebackofhyperearningsgrowth.
Thebase2011marketcapof7stockswaslessthanINR20billion,including6ofthemin
singledigitbillion.
Exhibit5 Top10FastestWealthCreators(201116)

RankCompany

PriceAppn.
(x)

CAGR(%)
Price
PAT

MktCap(INRb)
2016
2011

P/E(x)
2016
2011

AjantaPharma

53

121

52

124

31

WelspunIndia

23

88

234

100

14

226

EicherMotors

14

70

48

520

36

42

20

KajariaCeramics

13

66

30

76

33

Vakrangee

11

63

52

105

27

17

BajajFinance

10

59

39

373

26

29

10

PIIndustries

10

58

37

78

25

10

Symphony

56

15

83

77

17

AmaraRajaBaeries

56

27

150

16

31

11

AurobindoPharma

50

28

436

57

22

10

10

Exhibit6 HistoryofFastestWealthCreators(5yearPricemulplier,x)

837
665

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

22/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport
223
75
30

136

182

66695075

23

54

50

28

50

242827

53

KeyTakeaway
Smallsize+Scalability+Soundmanagement=SuperiorWealthCreaon
AlltheFastestWealthCreatorsweresmallinthebaseyear(i.e.2011)andoperanginalarge
sector(e.g.pharmaceucals,nance,autos)orscalableniche(aircoolers,ceramicles).
Underasoundmanagement,suchcompaniesareabletoclockascorchingpaceofearnings
growth.Thisinturnalsodrivesupvaluaons,leadingtosuperiorWealthCreaon.

9December2016

23

21stAnnualWealthCreaonStudy(20112016)

#4

TheMostConsistentWealthCreators
AsianPaintsistheMostConsistentWealthCreator
AsianPaints

istheMostConsistentWealthCreatoroverthe10yearperiod200616,

byvirtueof
3.Appearingamongtop100WealthCreatorsineachofthelast10studies;and
4.Highest10yearPriceCAGRof30%.
8ofthetop10MostConsistentWealthCreatorsareconsumerfacingcompanies,with
Bosch and CumminsIndia theonlyexcepons.
Exhibit7 Top10MostConsistentWealthCreators

Rank

Company

Appearedin10yrPrice10yrPAT

P/E(x)

RoE(%)

WCStudy(x)CAGR(%)CAGR(%)

20162006

20162006

AsianPaints

10

30

23

48

29

31

31

KotakMahindra

10

26

23

36

20

10

24

SunPharma

10

25

25

38

30

16

41

TitanCompany

10

23

24

44

45

20

47

Bosch

10

22

14

53

27

15

24

HDFCBank

10

21

31

21

28

17

16

AxisBank

10

20

33

13

20

16

18

DaburIndia

10

20

19

36

32

30

49

NestleIndia

10

17

11

63

29

32

92

CumminsIndia

10

17

15

32

26

22

23

10

Exhibit8 ConsumerfacingcompaniesmorelikelytobeConsistentWealthCreators

ConsistentWealthCreatorsbasedonlast5Studies

Consumerfacing

Consumer&
Healthcare
AsianPaints(5)
ITC(2)
Nestle(3)
SunPharma(5)

Auto

HeroMoto(1)
M&M(3)

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

NonConsumerfacing

Financials

AxisBank(4)
HDFC(2)
HDFCBank(4)
KotakMah.(5)

ACC(1)
Ambuja(1)
Bosch(4)
Hind.Zinc(2)
Infosys(1)

Cummins(2)
Siemens(1)

23/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport
Dabur(2)
Titan(2)

NOTE: Bracketindicatesnumberofmesappearedwithintop10inlast5WealthCreaonStudies

KeyTakeaway
Strongdiscreonarybrand=ConsistentWealthCreaon
Strongbrandsinbasicgoods(e.g.Colgate)failtofeatureamongConsistentWealthCreators
giventhemissingelementofgrowth.Incontrast,discreonarybrandslikeAsianPaintsenjoy
steadygrowth,translangtoConsistentWealthCreaon,fairlyagnosctopurchaseprice.
9December2016

24

21stAnnualWealthCreaonStudy(20112016)

#5

WealthCreatorsIndex(Wealthex)v/sBSESensex
Superiorearningsandpriceperformanceoverbenchmark
WecompareWealthex(top100WealthCreatorsMarketCapindex)withtheBSESensexon3
parameters(1)marketperformance,(2)earningsgrowthand(3)valuaon.
Marketperformance:
Over201116,WealthCreangcompanieshavedeliveredreturn
CAGRof19%v/s5%fortheBSESensex.March2016overMarch2011,Wealthexisup140%
whereastheSensexisup30%i.e.110%outperformanceover5years.
Earningsgrowth:

Wealthexclocked5yearearningsCAGRof13%v/s5%forBSESensex.

Further,YoYearningsgrowthforWealthexishigherforeveryyearexcept2011.
Valuaon: WealthexP/EhasseenamarginalrerangvisvistheSensex.Thus,the14pp
outperformanceofWealthexisexplainedlargelybythe8pphigherearningsCAGR.
Exhibit9 Wealthexv/sSensex:Superiormarketperformanceonthebackofhigherearningsgrowth

BSESensex

Mar11

Mar12

Mar13

Mar14

Mar15

Mar16

19,445

17,404

18,836

22,386

27,957

25,342

10

YoY(%)
WealthexbasedtoSensex

19,445

YoY(%)
SensexEPS(INR)

1,024

25,455

1,120

YoY(%)

19
31,956

25
47,123

9
46,573

10

19

26

47

1,120

1,181

1,337

1,356

1,330

13

YoY(%)
WealthexEPS(INR)

21,323

1,147

5Year
CAGR(%)
5

1,376

1,580

1,840

2,084

20

15

16

13

19
5
13

SensexPE(x)

19

16

16

17

21

19

WealthexPE(x)

17

19

19

20

26

22

Exhibit10 Wealthexinvariablyoutperformsbenchmarkindiceshandsomely

300
WealthexRebased

SensexRebased

250
200
110%Outperformance
150
100
50

KeyTakeaway
WhatnottobuyisasimportantasWhattobuy
Ofthe30Sensexstocksin2011,asmanyas18underperformedoverthenext5years,down
http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

24/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

anaverage12%CAGR.Ifaninvestorhadavoidedtheseandonlyboughttheremaining12,the
averagereturnCAGRwouldbe14%,handsomelyhigherthantheSensexs5%.
9December2016

25

21stAnnualWealthCreaonStudy(20112016)

#6

WealthCreaon:Sectoranalysis
Consumer/RetailisthebiggestWealthCreangsectoragain
Consumer/Retail

hasemergedasIndiasbiggestWealthCreangsectorforthesecond

consecuveme,andthethirdmeinthelastfouryears.
Deepcyclicals(Metals/Mining,

Oil&Gas,CapitalGoods)

havesignicantlylostoutto

secularandquasisecularsectors.
WealthCreaonwashighlyconcentrated

top5sectorsaccountedfor74%ofWealth

Creatorsand85%ofWealthCreated.
Exhibit11 Consumer/RetailisthetopWealthCreangsector

Sector

WCShareofWC%CAGR1116(%)

(Noofcompanies)

P/E(x)

RoE(%)

(INRb)

2016

2011

Price

PAT

2016

2011

2016

2011

Consumer/Retail(23)
Banking/Finance(14)

6,364
4,995

22
18

8
24

21
20

15
19

38
19

30
18

31
16

32
19

Technology(7)
Auto(15)

4,960
4,093

17
14

14
5

16
20

20
10

20
20

24
13

28
19

29
32

Healthcare(15)

3,705

13

25

18

30

22

18

18

Cement(5)

1,266

20

35

16

14

Oil&Gas(3)

670

14

21

26

10

27

14

CapitalGoods(4)
Telecom&Media(2)
Metals/Mining(2)

513
394
289

2
1
1

7
3
15

16
17
7

11
19
7

33
21
11

26
23
12

17
13
16

18
10
17

Ulity(1)
Others(9)

203
984

1
3

3
3

9
21

18
17

12
25

18
21

14
19

12
19

28,436

100

100

19

16

22

19

20

22

Total

Exhibit12 Consumer/Retail:BiggestWealthCreatorforthesecondconsecuveme(INRb)

7,103

7,586
6,364

5,826
4,949

5,194
4,456

3,891

3,672

2,723

2,126

Oil&
Gas

Oil&
Gas

Oil&
Gas

Oil&
Gas

Metals/
Mining

Finan
cials

2006

2007

2008

2009

2010

2011

FinanConsumerTechnoConsumerConsumer
cials
&Retail
logy
&Retail&Retail
2012

2013

2014

2015

2016

KeyTakeaway
ValueMigraonisincreasinglybecomingthekeydriverofrapidWealthCreaon
Threeofthetop5WealthCreangsectorsFinancials,TechnologyandHealthcareare
beneciariesofValueMigraoni.e.owofvaluefromoutmodedbusinessdesignstonew
businessdesigns.InFinancials,valueismigrangfrompublicsectorbankstoprivatebanks.In
TechnologyandHealthcare,valueismigrangfromdevelopedworldtoemergingmarkets.
9December2016

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

26

25/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

21stAnnualWealthCreaonStudy(20112016)

#7

WealthCreaon:OwnershipPrivatev/sPSU
PSUsremaininsignicantinWealthCreaon
PSUs(publicsectorundertakings)WealthCreaonperformanceconnuestobedismal
during201116:
ThenumberofPSUsinthetop100WealthCreatorsisonly7.
WealthCreatedbythese7PSUsis4%,marginallyhigherthantheprevioustwostudies.
The7WealthCreangPSUsare

BPCL,HPCL,PetronetLNG,Concor,LICHousing,Bharat

Electronics and PowerGridCorporaon.


AveragePriceCAGRofPSUWealthCreatorsis15%v/s19%forprivatesectorcounterparts.
Exhibit13 PSUsremaininsignicantinWealthCreaon

51

No.ofPSUs

36

35

30

27

25

%WealthCreated

27
20
9

30

26

18

25

16

22

24

20

11

7
4

Exhibit14 RobustPATCAGRof20%isthekey

Exhibit15 3ofthe7PSUWealthCreatorsare

driverofWealthCreaonforthe7PSUs

fromOil&Gas(BPCL,HPCL,PetronetLNG)
20112016
PSU
7

Private
93

96

5yearSalesCAGR(%)

18

5yearPATCAGR(%)

20

16

5yearPriceCAGR(%)

15

19

P/E2011(x)

13

20

P/E2016(x)

11

24

RoE2011(%)

14

23

RoE2016(%)

20

20

No.ofWealthCreatorsinTop100
ShareofWealthCreated(%)

Capital
Goods
13%

Ulies
16%

Others
7%
Financials
10%

Oil&Gas
54%

KeyTakeaway
CanindustrialrecoveryandgovernmentfocusleadtomeanreversionforPSUs?
FortunesofmanyPSUshingeonperformanceoftheeconomy,especiallytheindustrialsector
CoalIndia,BHEL,SBI,SAIL,etc.MeasurestoboostindustrialrecoveryMakeinIndia,rate
cutsbodewellforthefortunesofsuchPSUs.Further,thegovernmenttooisfocusedon
revivingPSUse.g.mergerofSBIassociatebanks.These,coupledwithlowvaluaonsofPSUs,
holdthepotenaltotriggermeanreversioninWealthCreaonbyPSUs.
9December2016

27

21stAnnualWealthCreaonStudy(20112016)

#8

WealthCreaon:MarketCapRankAnalysis

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

26/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

Inour2015WealthCreaonStudy,wecalledlarge,midandsmallcapstocksas

Mega,Mid and

Mini, denedasunder:

Mega

Mid

Mini

Top100stocksbymarketcaprankforanygivenyear

Next200stocksbymarketcaprank
Allstocksbelowthetop300ranks.

Marketcapranksofcompanieschangeconstantly.Overme,companiesalsocrossoverfrom
onecategorytoanother.Fortheperiod201116,themarketcapcrossovermatrixstandsas
under
Exhibit16 201116:Marketcapcrossovers:No.ofcompaniesandaveragereturns

FROM(in2011)
Mini

Mid

Mega

New

Demerger

TOTAL

26

71

100

31%

8%

19

200

711

3,278

TO(in2016)
Mega

AvgReturn

Mid
AvgReturn

Mini

67

88

25

39%

9%

16%

2,479

84

AvgReturn

1%

20%

32%

Delisted,
Demerger,etc

397

400

2,943

200

100

735

3,978

2%

0%

1%

TOTAL
AvgReturn

9December2016

28

21stAnnualWealthCreaonStudy(20112016)

Weanalyzedthe3posivecrossovers
1.MinitoMega
2.MinitoMidand
3.MidtoMega.

8.1MinitoMega:Nocompanies
During201116,therewasnocompanywhichmovedfromMinitoMega.

8.2MinitoMid:67companies,39%averagePriceCAGR
http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

27/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

During201116,67companiescrossedoverfromMinitoMidcategory,generangan
averagereturnCAGRof39%,v/s5%fortheSensex.
Ofthese67MinitoMidstocks,15featureinourlistof100BiggestWealthCreators.
7ofthetop10fastestWealthCreatorsarefeaturedinthelist.
Exhibit17 MinitoMid(201116):15of67MinitoMidstocksfeatureamongtop100WealthCreators

MktCapRank

Price

WCRank

AjantaPharma
WelspunIndia

2016
127
153

2011
910
728

CAGR%
121
88

KajariaCeramics
Vakrangee

190
148

606
520

66
63

100
83

PIInds
Symphony

186
175

567
510

58
56

99
95

AmaraRaja

113

386

56

PageIndustries
GRUHFinance

122
172

359
436

50
46

Mindtree
WABCOIndia
BlueDartExpress

144
132
117

388
338
304

SupremeInds

160

CholamandalamInv

139

AbboIndia

152

PAT

BiggestFastest
68
1
81
2

P/E(x)

CAGR%
52
234

2016
31
14

2011
5
226

4
5

30
52

33
27

9
17

7
8

37
15

25
77

10
14

59

27

31

11

72
94

11
13

32
22

58
36

31
14

46
43
43

84
78
69

14
16
17

42
9
15

18
60
75

15
15
29

351

38

92

23

42

12

327

33

90

27

49

19

27

355

28

98

36

34

39

29

*201116WealthCreaonRank

8.3MidtoMega:26companies,31%averagePriceCAGR
During201116,26companiescrossedoverfromMidtoMega(listedonnextpage).
Allthe26madeittothisyearslistof100BiggestWealthCreators.
TheMidtoMegaporoliodeliveredaveragereturnCAGRof31%over201116v/s5%for
Sensex.

9December2016

29

21stAnnualWealthCreaonStudy(20112016)

Exhibit18 MidtoMega(201116):26companies,31%averagePriceCAGRv/s5%forSensex

MktCapRank

Price

WCRank*

2016

2011

CAGR%

36
49

222
282

70

13

59

AurobindoPharma
BritanniaInds

43

166

59

188

ShreeCement
RajeshExports

44

139

99
83
94

244
177
181

55
65

EicherMotors
BajajFinance

TorrentPharma
HavellsIndia
MothersonSumi
PidiliteInds
AshokLeyland
Marico
Emami
P&GHygiene
BajajFinserv

PAT

P/E(x)

CAGR%

2016

2011

48

42

19

23

39

29

10

50
48

19
25

10
12

28
46

22
40

10
37

43
42

21
50

18
19

16
34

96
17

34
13

36
34

43
48

24
25

46
15

13
33

18
15

126
135

33

28

26

27

28

22

32

35

29

20

41

25

64
60

136
122

31

34

31

11

30

12

28

36

37

23

44

34

89

157

92
72

162
134

28
28

51
54

38
39

12
23

52
48

27
42

27

42

42

13

15

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

BiggestFastest

28/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport
UPL
Divi'sLabs
TechMahindra

90
77
40

146
116
123

26
24
23

52
44
32

44
53
56

19
21
26

15
23
15

13
21
9

ApolloHospitals

98

161

23

70

57

11

58

32

GlenmarkPharma
YesBank

86

133

51

103

23
23

57
37

58
59

10
28

31
14

17
15

GlaxoSmith.Cons.
BharatForge
LICHousing

79
93

109
128

80
96

104
114

22
20
17

46
67
61

60
62
69

18
18
12

37
31
15

33
28
11

97

102

16
11

80
91

71
85

7
5

22
35

15
23

22

25

17

PetronetLNG
CastrolIndia
Average

31

*201116WealthCreaonRank

KeyTakeaway
Midcategory:AgoodplacetohuntforWealthCreators
TheMidtoMegaporolioof26stockshashandsomelyoutperformedthebenchmark.The
highsuccessrateof13%(26of200)makestheMidcategoryagoodplacetohuntforWealth
Creators.
9December2016

30

21stAnnualWealthCreaonStudy(20112016)

#9

WealthCreaon:Valuaonparametersanalysis
Paybackrao<1oersdisnctlysuperiorreturns
Thegeneralruleoflowvaluaon,highreturnsheldtruein201116.
Everystudyinvariablysuggeststhatthehighestreturnisgeneratedwhenpaybackraois
lessthan1x.Sevenofthetop10fastestWealthCreatorshadpaybackraooflessthan1x
inthebaseyear2011.
(PaybackisaproprietaryraoofMolalOswal,denedascurrentmarketcapdividedby
esmatedprotsoverthenextveyears.For2011,wecalculatethisraobasedonthe
actualprotsreportedoverthenextveyears).
Exhibit19 Paybackraolessthan1xremainsasureshotformulaformulbaggers
Range

No.of

WC

%Share

in2011

Cos.

(INRb)

ofWC

Price

CAGR(%)
PAT

2016

RoE(%)
2011

<10

13

2,047

23

12

19

32

1020

33

7,055

25

18

14

18

19

2030

38

16,923

60

19

18

21

22

>30

16

2,410

21

16

21

22

Total

100

28,436

100

19

16

20

22

P/E

Price/Book

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

29/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport
<2

15

2,197

22

18

17

13

23

18

4,603

16

22

15

17

18

34

17

3,810

13

19

10

14

23

45

10

5,003

18

22

23

19

19

>5

40

12,822

45

17

15

28

34

Total

100

28,436

100

19

16

20

22

Price/Sales
<1

22

4,228

15

25

16

20

22

12

17

3,140

11

23

14

16

18

23

17

3,985

14

23

16

19

22

34

19

5,926

21

19

16

19

24

>4

25

11,156

39

16

16

21

22

Total

100

28,436

100

19

16

20

22

<1

14

1,956

39

19

20

24

12

26

5,706

20

21

17

19

22

23

29

12,718

45

19

17

19

20

>3

31

8,056

28

16

11

23

25

Total

100

28,436

100

19

16

20

22

Paybackrao

9December2016

31

21stAnnualWealthCreaonStudy(20112016)

#10 Thosewhomissedthelist
Thebigwhodidntbeatthemarket
During201116,theSensexreturnCAGRwas5.4%.
5companies Wipro,IndianOil,Larsen&Toubro,ICICIBank,Siemens
createdenough
wealthtoqualifyamongthe100biggest,butfailedtomakeittothenallistastheirstock
pricereturnwaslowerthantheSensex.
Theymadewayfor5otherstojointhelist

Wockhardt,RamcoCement,AbboIndia,

PIIndustries and KajariaCeramics.


Exhibit20 Thosewhomissedthelist

WC*
(INRb)

Exhibit21

Price
Potenal
CAGR(%)SizeRank**

andthosewhomadeit
WC*
Price
(INRb)
CAGR(%)

Size
Rank

Wipro

234

3.3

33

Wockhardt

72

25

96

IOCL

144

3.3

57

RamcoCem.

71

32

97

L&T

114

2.0

76

AbboIndia

70

28

98

ICICIBank

86

1.2

90

PIInds

70

58

99

Siemens

78

4.5

96

KajariaCera.

69

66

100

*WealthCreated;**Sizerankhadthestockoutperformedthebenchmark

Thefastwhodidntmakeitbig
The100thbiggestWealthCreatorcreatedWealthofINR69billion.Overa100more
companiesbeatthebenchmarkreturnCAGR5.4%butcreatedabsolutewealthlessthan
INR69billion.
Thetablebelowliststhetop20amongthem.
Exhibit22 Thefastwhodidntmakeitbig

Price
CAGR(%)

Price
Appreciaon(x)

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

WealthCreated
(INRb)

30/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport
SolarIndustries

43

5.9

52

JKCements
BalkrishnaInds
FagBearings

37
36
36

4.8
4.7
4.6

37
49
50

DalmiaBharat
FinolexIndustries

34
33

4.3
4.2

49
34

PersistentSystems
SRF

33
33

4.2
4.1

47
57

SPARC

33

4.1

54

HexawareTech
Arvind

32
32

4.1
4.0

62
54

BajajCorp
HoneywellAuto
ForceMotors

31
31
29

3.9
3.8
3.6

42
56
27

ICRA

29

3.6

28

ThomasCook(I)

29

3.6

40

AegisLogiscs

27

3.4

23

SundramFasteners
Entertain.Network

27
25

3.3
3.1

25
25

CapitalFirst

25

3.1

25

9December2016

32

21stAnnualWealthCreaonStudy(20112016)

#11 WealthDestrucon:Companies&Sectors
TheCommodityCollapseConnues
ThetotalWealthDestroyedduring201116isINR15trillion,53%ofthetotalWealth
Createdbytop100companies.
7ofthetop10WealthDestroyersareinthebusinessofglobalcommodies.
ThebroaderthemeofWealthDestruconis

cyclicaldownturn.

Metals/Miningisthe

biggestWealthDestroyingsectoraswasthecaselastyear.ThisisfollowedbyBanking&
Finance,whichmainlyincludesstateownedbanksatthewrongendoftheNPAcycle.
CapitalGoodsandConstrucon/RealEstatealsocorroboratethecyclicaldownturntheme.
Exhibit23

Exhibit24

GlobalcommoditycompaniestopWealthDestroyerslist

Theusualsuspectsatthesectorleveltoo

Company

WealthDestroyed
INRb

Price

%ShareCAGR(%)

Wealth
Destroyed
(INRb)
5,058

Sector

%
Share

MMTC
NMDC

889
735

6
5

47
19

BHEL
ONGC
JindalSteel
Vedanta
StateBankofIndia
NTPC

730
645
592
570
542
529

5
4
4
4
4
3

23
6
39
21
7
8

Banking&Finance
Ulies
CapitalGoods
Oil&Gas

2,991
1,555
1,393
1,256

20
10
9
8

Constn./RealEst.
Technology

1,012
301

7
2

524
348
6,104
15,146

3
2
40
100

24
3

Chemicals&Fert.
Telecom
Others
Total

295
214
1,071
15,146

2
1
7
100

SAIL
CoalIndia
Totalofabove
TotalWealthDestroyed

Metals/Mining

33

Exhibit25 LevelofWealthDestruconconnuestoclimb
93

Wealthdestroyed(INRb)
%ofWealthCreatedbytop100WealthCreators

53
43

33
18

2,586

43

124

142

59

14

15
2

1,704

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

650

3,254

5,425

17,140

4,185

14,65415,146

31/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

KeyTakeaway
CyclicalsWhentoSellasimportantasWhentoBuy
Invesnginsecularstocksandinvesngincyclicalstocksarebesttreatedastwodisnct
.
investmentstyles.Inbothcases,WhentoBuyisimportant.However,wheninvesngin
cyclicalstocks,WhentoSellisasimportantifnotmore.Failuretosellatthepeakofthecycle
willmostlikelyleadtoaprolongedperiodofunderperformance.
9December2016

33

21stAnnualWealthCreaonStudy(20112016)

Appendix1:MOSL100:BiggestWealthCreators(20112016)
Rank

Company

WealthCreated

CAGR(201116,%)

RoE(%)

P/E(x)

INRb

Share(%)

Price

PAT

Sales

2016

2011

2016

2011

TCS

2,637

9.3

16

22

24

37

37

21

26

HDFCBank

1,475

5.2

18

26

26

17

16

21

27

Hind.Unilever

1,266

4.5

25

14

11

102

76

46

30

ITC

1,197

4.2

13

14

12

28

30

28

28

SunPharma

1,169

4.1

30

24

38

16

19

38

26

Infosys

948

3.3

15

18

24

26

20

27

HCLTechnologies

819

2.9

28

27

14

20

21

21

20

KotakMahindraBank

760

2.7

24

17

28

10

14

36

21

MaruSuzuki

742

2.6

24

14

10

17

16

25

16

10

HDFC

682

2.4

10

18

16

20

21

17

23

11

AsianPaints

591

2.1

28

16

16

31

38

48

29

12

UltraTechCement

574

2.0

23

10

13

10

13

40

23

13

EicherMotors

484

1.7

70

48

29

36

14

42

20

14

Lupin

480

1.7

29

21

20

21

26

29

21

15

Bosch

443

1.6

25

10

15

21

53

24

16

BPCL

428

1.5

24

35

29

12

12

17

AxisBank

401

1.4

10

20

22

16

18

13

17

18

IndusIndBank

380

1.3

30

32

26

13

15

25

21

19

AurobindoPharma

379

1.3

50

28

26

28

23

22

10

20

TataMotors

365

1.3

18

16

48

21

ShreeCement

360

1.3

43

16

10

11

96

34

22

GodrejConsumer

346

1.2

30

19

19

22

28

41

25

23

BajajFinance

322

1.1

59

39

39

17

18

29

10

24

M&M

321

1.1

12

16

11

20

24

15

25

BritanniaInds

277

1.0

48

46

13

45

37

40

37

26

BajajAuto

274

1.0

11

27

58

20

15

27

HeroMotoCorp

271

1.0

13

10

37

62

20

17

28

MothersonSumi

270

0.9

33

27

36

30

24

28

22

29

DaburIndia

268

0.9

21

17

16

30

40

36

30

30

ZeeEntertainment

264

0.9

26

11

14

25

20

35

19

31

DrReddy'sLabs

239

0.8

13

10

13

24

33

28

32

TechMahindra

237

0.8

23

26

39

22

29

15

33

AdaniPorts

231

0.8

13

25

29

22

22

18

30

34

AshokLeyland

228

0.8

31

11

13

26

24

30

12

35

PidiliteInds

227

0.8

32

20

15

27

28

41

25

36

Marico

226

0.8

28

23

14

34

28

44

34

37

YesBank

223

0.8

23

28

27

18

19

14

15

38

UnitedSpirits

205

0.7

19

10

18

13

115

26

39

PowerGridCorpn

203

0.7

18

20

14

12

12

18

40

NestleIndia

202

0.7

32

96

63

43

41

HindustanZinc

194

0.7

10

21

22

10

12

42

BajajFinserv

186

0.7

27

13

42

14

27

15

43

TorrentPharma

178

0.6

36

46

25

53

26

13

18

44

Divi'sLabs

172

0.6

24

21

23

26

24

23

21

45

CadilaHealthcare

162

0.6

15

16

16

28

33

21

23

46

GlaxoSmithklineCons.

160

0.6

22

18

13

28

31

37

32

47

BharatElectronics

158

0.6

17

10

15

17

21

15

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

32/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport
48
49

HavellsIndia
Cipla

155
154

0.5
0.5

34
10

15
8

7
17

24
12

50

RajeshExports

151

0.5

42

34

52

22

Company

WealthCreated

Rank

INRb

Share(%)

CAGR(201116,%)
Price

PAT

47
15

33
28

16

17

RoE(%)

Sales

2016

15
26
13
P/E(x)

2011

2016

2011

9December2016

34

21stAnnualWealthCreaonStudy(20112016)

Appendix1:MOSL100:BiggestWealthCreators(20112016)connued
Rank

Company

WealthCreated

CAGR(201116,%)

RoE(%)

P/E(x)

INRb

Share(%)

Price

PAT

Sales

2016

2011

2016

2011

51

Emami

151

0.5

28

12

16

29

33

52

27

52

UPL

145

0.5

26

19

18

20

15

15

13

53

HPCL

145

0.5

17

21

29

14

54

P&GHygiene

145

0.5

28

23

20

28

25

48

39

55

Glaxosmith.Pharma

145

0.5

13

22

30

86

31

56

BergerPaints

139

0.5

41

19

15

24

21

47

21

57

GlenmarkPharma

138

0.5

23

10

21

24

22

31

17

58

MRF

136

0.5

44

46

22

34

21

59

AmaraRajaBaeries

134

0.5

56

27

22

23

23

31

11

60

AmbujaCement

133

0.5

10

10

17

50

19

61

LICHousingFinance

132

0.5

17

12

21

18

23

15

11

62

TitanCompany

132

0.5

12

10

12

20

42

44

39

63

OracleFinancial

131

0.5

12

32

21

25

15

64

IdeaCellular

130

0.5

10

24

18

10

16

25

65

GrasimInds

127

0.4

11

15

16

10

66

TVSMotor

125

0.4

40

23

12

25

19

41

22

67

BharatForge

124

0.4

20

18

18

15

31

28

68

AjantaPharma

122

0.4

121

52

28

35

22

31

69

BlueDartExpress

120

0.4

43

15

17

47

17

75

25

70

ApolloHospitals

119

0.4

23

11

18

10

58

32

71

SundaramFinance

118

0.4

40

16

14

22

24

72

PageIndustries

117

0.4

50

32

29

46

47

58

31

73

ColgatePalmolive

114

0.4

15

13

59

105

38

28

74

PiramalEnterprises

107

0.4

20

28

32

19

26

75

BayerCropScience

107

0.4

33

18

12

17

20

44

27

76

KansaiNerolac

104

0.4

26

20

13

21

20

32

26

77

ABB

102

0.4

10

36

10

89

257

78

WABCOIndia

99

0.3

43

16

19

33

60

15

79

CumminsIndia

98

0.3

11

22

33

32

23

80

PetronetLNG

97

0.3

16

16

13

23

22

15

81

WelspunIndia

96

0.3

88

234

23

35

14

226

82

JSWSteel

95

0.3

12

11

20

12

83

Vakrangee

94

0.3

63

52

29

26

14

27

17

84

Mindtree

94

0.3

46

42

25

25

13

18

15

85

UnitedBreweries

91

0.3

11

15

11

14

14

73

83

86

GilleeIndia

86

0.3

20

20

14

25

14

68

66

87

CRISIL

85

0.3

23

11

17

32

41

47

27

88

ContainerCorpn.

84

0.3

10

10

18

31

18

89

3MIndia

84

0.3

26

15

12

20

18

60

38

90

CholamandalamInv.

81

0.3

33

49

28

16

19

27

91

CastrolIndia

79

0.3

11

108

89

30

22

92

SupremeInds

75

0.3

38

17

35

42

10

93

BajajHoldings

74

0.3

13

12

15

31

94

GRUHFinance

74

0.3

46

22

29

29

29

36

14

95

Symphony

74

0.3

56

15

34

41

77

17

96

Wockhardt

72

0.3

25

14

322

36

97

RamcoCement

71

0.3

32

21

18

12

17

12

98

AbboIndia

70

0.2

28

34

20

23

20

39

30

99

PIInds

70

0.2

58

37

24

27

32

25

10

100

KajariaCeramics

69

0.2

66

30

20

25

28

33

28,436

100.0

19

16

15

20

22

22

19

Sales

2016

2011

2016

TOTAL
Rank

Company

WealthCreated
INRb

Share(%)

CAGR(201116,%)
Price

9December2016

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

PAT

RoE(%)

P/E(x)
2011
35

33/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

21stAnnualWealthCreaonStudy(20112016)

Appendix2:MOSL100:FastestWealthCreators(20112016)
RankCompany

201116Price
CAGR(%)Times(x)

CAGR1116(%)
PAT

Sales

WealthCreated
INRbShare(%)

RoE(%)

P/E(x)

20162011

2016

2011

AjantaPharma

121

52.8

52

28

122

0.4

35

22

31

WelspunIndia

88

23.3

234

23

96

0.3

35

14

226

EicherMotors

70

14.4

48

29

484

1.7

36

14

42

20

KajariaCeramics

66

12.6

30

20

69

0.2

25

28

33

Vakrangee

63

11.3

52

29

94

0.3

26

14

27

17

BajajFinance

59

10.2

39

39

322

1.1

17

18

29

10

PIInds

58

9.7

37

24

70

0.2

27

32

25

10

Symphony

56

9.3

15

74

0.3

34

41

77

17

AmaraRajaBaeries

56

9.3

27

22

134

0.5

23

23

31

11

10AurobindoPharma

50

7.6

28

26

379

1.3

28

23

22

10

11PageIndustries

50

7.5

32

29

117

0.4

46

47

58

31

12BritanniaInds

48

7.2

46

13

277

1.0

45

37

40

37

13GRUHFinance

46

6.6

22

29

74

0.3

29

29

36

14

14Mindtree

46

6.6

42

25

94

0.3

25

13

18

15

15MRF

44

6.1

46

22

136

0.5

34

21

16WABCOIndia

43

6.0

16

99

0.3

19

33

60

15

17BlueDartExpress

43

6.0

15

17

120

0.4

47

17

75

25

18ShreeCement

43

6.0

16

10

360

1.3

11

96

34

19RajeshExports

42

5.7

34

52

151

0.5

22

16

17

13

20BergerPaints

41

5.6

19

15

139

0.5

24

21

47

21

21SundaramFinance

40

5.4

16

118

0.4

14

22

24

22TVSMotor

40

5.4

23

12

125

0.4

25

19

41

22

23SupremeInds

38

5.1

75

0.3

17

35

42

10

24TorrentPharma

36

4.6

46

25

178

0.6

53

26

13

18

25HavellsIndia

34

4.3

15

155

0.5

24

47

33

15

26MothersonSumi

33

4.2

27

36

270

0.9

30

24

28

22

27CholamandalamInv.

33

4.1

49

28

81

0.3

16

19

27

28BayerCropScience

33

4.1

18

12

107

0.4

17

20

44

27

29PidiliteInds

32

4.0

20

15

227

0.8

27

28

41

25

30RamcoCement

32

3.9

21

71

0.3

18

12

17

12

31AshokLeyland

31

3.8

11

13

228

0.8

26

24

30

12

32GodrejConsumer

30

3.8

19

19

346

1.2

22

28

41

25

33SunPharma

30

3.7

24

38

1,169

4.1

16

19

38

26

34IndusIndBank

30

3.7

32

26

380

1.3

13

15

25

21

35Lupin

29

3.6

21

20

480

1.7

21

26

29

21

36AbboIndia

28

3.5

34

20

70

0.2

23

20

39

30

37Marico

28

3.5

23

14

226

0.8

34

28

44

34

38Emami

28

3.5

12

16

151

0.5

29

33

52

27

39P&GHygiene

28

3.5

23

20

145

0.5

28

25

48

39

40AsianPaints

28

3.4

16

16

591

2.1

31

38

48

29

41HCLTechnologies

28

3.4

27

14

819

2.9

20

21

21

20

42BajajFinserv

27

3.3

13

42

186

0.7

14

27

15

433MIndia

26

3.2

15

12

84

0.3

20

18

60

38

44UPL

26

3.2

19

18

145

0.5

20

15

15

13

45KansaiNerolac

26

3.2

20

13

104

0.4

21

20

32

26

46ZeeEntertainment

26

3.1

11

14

264

0.9

25

20

35

19

47Bosch

25

3.1

10

443

1.6

15

21

53

24

48Hind.Unilever

25

3.1

14

11

1,266

4.5

102

76

46

30

49Wockhardt

25

3.0

14

72

0.3

322

36

50KotakMahindra

24

3.0

17

28

760

2.7

10

14

36

21

RankCompany

201116Price
CAGR(%)Times(x)

CAGR1116(%)
PAT

Sales

WealthCreated
INRbShare(%)

RoE(%)
20162011

P/E(x)
2016

2011

9December2016

36

21stAnnualWealthCreaonStudy(20112016)

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

34/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

Appendix2:MOSL100:FastestWealthCreators(20112016)connued
RankCompany

201116Price

CAGR(1116,%)

CAGR(%)Times(x)

PAT

Sales

WealthCreated

INRbShare(%)

RoE(%)

P/E(x)

20162011

2016

2011

51BPCL

24

2.9

35

428

1.5

29

12

12

52MaruSuzuki

24

2.9

14

10

742

2.6

17

16

25

16

53Divi'sLabs

24

2.9

21

23

172

0.6

26

24

23

21

54CRISIL

23

2.9

11

17

85

0.3

32

41

47

27

55UltraTechCement

23

2.8

10

13

574

2.0

10

13

40

23

56TechMahindra

23

2.8

26

39

237

0.8

22

29

15

57ApolloHospitals

23

2.8

11

18

119

0.4

10

58

32

58GlenmarkPharma

23

2.8

10

21

138

0.5

24

22

31

17

59YesBank

23

2.8

28

27

223

0.8

18

19

14

15

60GlaxoSmithklineCons

22

2.7

18

13

160

0.6

28

31

37

32

61DaburIndia

21

2.6

17

16

268

0.9

30

40

36

30

62BharatForge

20

2.5

18

124

0.4

18

15

31

28

63GilleeIndia

20

2.5

20

14

86

0.3

25

14

68

66

64PiramalEnterprises

20

2.5

28

32

107

0.4

19

26

65UnitedSpirits

19

2.4

10

205

0.7

18

13

115

26

66HDFCBank

18

2.3

26

26

1,475

5.2

17

16

21

27

67HPCL

17

2.2

21

145

0.5

29

14

68BharatElectron

17

2.2

10

158

0.6

15

17

21

15

69LICHousingFinance

17

2.2

12

21

132

0.5

18

23

15

11

70TCS

16

2.1

22

24

2,637

9.3

37

37

21

26

71PetronetLNG

16

2.1

16

97

0.3

13

23

22

15

72ColgatePalmolive

15

2.0

13

114

0.4

59

105

38

28

73CadilaHealthcare

15

2.0

16

16

162

0.6

28

33

21

23

74HeroMotoCorp

13

1.9

10

271

1.0

37

62

20

17

75DrReddy'sLabs

13

1.9

10

239

0.8

13

24

33

28

76BajajHoldings

13

1.8

12

74

0.3

15

31

77AdaniPorts

13

1.8

25

29

231

0.8

22

22

18

30

78Glaxosmith.Pharma

13

1.8

145

0.5

22

30

86

31

79ITC

13

1.8

14

12

1,197

4.2

28

30

28

28

80TitanCompany

12

1.8

10

12

132

0.5

20

42

44

39

81OracleFinancial

12

1.8

131

0.5

32

21

25

15

82M&M

12

1.7

16

321

1.1

11

20

24

15

83CumminsIndia

11

1.7

98

0.3

22

33

32

23

84UnitedBreweries

11

1.7

15

11

91

0.3

14

14

73

83

85CastrolIndia

11

1.7

79

0.3

108

89

30

22

86BajajAuto

11

1.6

274

1.0

27

58

20

15

87IdeaCellular

10

1.6

24

18

130

0.5

10

16

25

88ABB

10

1.6

36

102

0.4

10

89

257

89Cipla

10

1.6

17

154

0.5

12

15

28

26

90AxisBank

10

1.6

20

22

401

1.4

16

18

13

17

91HDFC

10

1.6

18

16

682

2.4

20

21

17

23

92AmbujaCement

10

1.6

10

133

0.5

17

50

19

93NestleIndia

1.6

202

0.7

32

96

63

43

94TataMotors

1.6

18

365

1.3

16

48

95GrasimInds

1.6

11

127

0.4

15

16

10

96ContainerCorpn

1.5

10

84

0.3

10

18

31

18

97Infosys

1.5

15

18

948

3.3

24

26

20

27

98JSWSteel

1.4

12

95

0.3

11

20

12

99PowerGridCorpn

1.4

18

20

203

0.7

14

12

12

18

100HindustanZinc

1.3

10

194

0.7

21

22

10

12

19

2.4

16

15

28,436

100.0

20

22

22

TOTAL
RankCompany

201116Price

CAGR(1116,%)

CAGR(%)Times(x)

PAT

Sales

WealthCreated

RoE(%)

INRbShare(%)

19
P/E(x)

20162011

2016

2011

9December2016

37

21stAnnualWealthCreaonStudy(20112016)

Appendix3:MOSL100:Alphabecalorder
WCRank
Company

WealthCreated

BiggestFastest

INRb

Price

WCRank
Price

CAGR%Mult.(x)

Company

BiggestFastest

WealthCreated
INRb

Price

Price

CAGR%Mult.(x)

3MIndia

89

43

84

26

3.2

Hind.Unilever

48

1,266

25

3.1

ABB

77

88

102

10

1.6

HindustanZinc

41

100

194

1.3

AbboIndia

98

36

70

28

3.5

IdeaCellular

64

87

130

10

1.6

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

35/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport
AdaniPorts
AjantaPharma

33
68

77
1

231
122

13
121

1.8
52.8

IndusIndBank
Infosys

18
6

34
97

380
948

30
9

3.7
1.5

AmaraRajaBaeries
AmbujaCement

59

134

56

9.3

60

92

133

10

1.6

ITC

79

1,197

13

1.8

JSWSteel

82

98

95

ApolloHospitals

70

57

119

23

1.4

2.8

KajariaCeramics

100

69

66

12.6

AshokLeyland

34

31

228

AsianPaints

11

40

591

31

3.8

KansaiNerolac

76

45

104

26

3.2

28

3.4

KotakMahindra

50

760

24

AurobindoPharma

19

10

3.0

379

50

7.6

LICHousingFinance

61

69

132

17

AxisBank

17

2.2

90

401

10

1.6

Lupin

14

35

480

29

BPCL

3.6

16

51

428

24

2.9

M&M

24

82

321

12

1.7

BajajAuto

26

86

274

11

1.6

Marico

36

37

226

28

3.5

BajajFin.

23

322

59

10.2

MaruSuzuki

52

742

24

2.9

BajajFinserv

42

42

186

27

3.3

Mindtree

84

14

94

46

6.6

BajajHoldings

93

76

74

13

1.8

MothersonSumi

28

26

270

33

4.2

BayerCropScience

75

28

107

33

4.1

MRF

58

15

136

44

6.1

BergerPaints

56

20

139

41

5.6

NestleIndia

40

93

202

1.6

BharatElectron

47

68

158

17

2.2

OracleFinancial

63

81

131

12

1.8

BharatForge

67

62

124

20

2.5

P&GHygiene

54

39

145

28

3.5

BlueDartExpress

69

17

120

43

6.0

PIInds

99

70

58

9.7

Bosch

15

47

443

25

3.1

PageIndustries

72

11

117

50

7.5

BritanniaInds

25

12

277

48

7.2

PetronetLNG

80

71

97

16

2.1

CadilaHealthcare

45

73

162

15

2.0

PidiliteInds

35

29

227

32

4.0

CastrolIndia

91

85

79

11

1.7

PiramalEnterprises

74

64

107

20

2.5

CholamandalamInv.

90

27

81

33

4.1

PowerGridCorpn

39

99

203

1.4

Cipla

49

89

154

10

1.6

RajeshExports

50

19

151

42

5.7

ColgatePalmolive

73

72

114

15

2.0

ShreeCement

21

18

360

43

6.0

ContainerCorpn

88

96

84

1.5

SunPharma

33

1,169

30

3.7

CRISIL

87

54

85

23

2.9

SundaramFinance

71

21

118

40

5.4

CumminsIndia

79

83

98

11

1.7

SupremeInds

92

23

75

38

5.1

DaburIndia

29

61

268

21

2.6

Symphony

95

74

56

9.3

Divi'sLabs

44

53

172

24

2.9

TataMotors

20

94

365

1.6

DrReddy'sLabs

31

75

239

13

1.9

TCS

70

2,637

16

2.1

EicherMotors

13

484

70

14.4

TechMahindra

32

56

237

23

2.8

Emami

51

38

151

28

3.5

TheRamcoCement

97

30

71

32

3.9

GilleeIndia

86

63

86

20

2.5

TitanCompany

62

80

132

12

1.8

Glaxosmith.Pharma

55

78

145

13

1.8

TorrentPharma

43

24

178

36

4.6

GlaxoSmithh.Cons.

46

60

160

22

2.7

TVSMotor

66

22

125

40

5.4

GlenmarkPharma

57

58

138

23

2.8

UltraTechCement

12

55

574

23

2.8

GodrejConsumer

22

32

346

30

3.8

UnitedBreweries

85

84

91

11

1.7

GrasimInds

65

95

127

1.6

UnitedSpirits

38

65

205

19

2.4

GRUHFinance

94

13

74

46

6.6

UPL

52

44

145

26

3.2

HDFC

10

91

682

10

1.6

Vakrangee

83

94

63

11.3

HPCL

53

67

145

17

2.2

WABCOIndia

78

16

99

43

6.0

HavellsIndia

48

25

155

34

4.3

WelspunIndia

81

96

88

23.3

HCLTechnologies

41

819

28

3.4

Wockhardt

96

49

72

25

3.0

HDFCBank

66

1,475

18

2.3

YesBank

37

59

223

23

2.8

27

74

271

13

1.9

ZeeEntertainment

30

46

264

26

3.1

HeroMotoCorp
9December2016

38

21stAnnualWealthCreaonStudy(20112016)

SpaceforNotes

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

36/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

9December2016

39

21stAnnualWealthCreaonStudy(20112016)

SpaceforNotes

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

37/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

9December2016

40

Disclosures

SectorUpdate|Technology

ThisdocumenthasbeenpreparedbyMotilalOswalSecuritiesLimited(hereinafterreferredtoasMost)toprovideinformationaboutthecompany(ies)and/sector(s),ifany,coveredinthereportandmaybedistributedbyitand/orits
affiliatedcompany(ies).Thisreportisforpersonalinformationoftheselectedrecipient/sanddoesnotconstruetobeanyinvestment,legalortaxationadvicetoyou.Thisresearchreportdoesnotconstituteanoffer,invitationor
inducementtoinvestinsecuritiesorotherinvestmentsandMotilalOswalSecuritiesLimited(hereinafterreferredasMOSt)isnotsolicitinganyactionbaseduponit.Thisreportisnotforpublicdistributionandhasbeenfurnishedto
yousolelyforyourgeneralinformationandshouldnotbereproducedorredistributedtoanyotherpersoninanyform.Thisreportdoesnotconstituteapersonalrecommendationortakeintoaccounttheparticularinvestment
objectives,financialsituations,orneedsofindividualclients.Beforeactingonanyadviceorrecommendationinthismaterial,investorsshouldconsiderwhetheritissuitablefortheirparticularcircumstancesand,ifnecessary,seek
professionaladvice.Thepriceandvalueoftheinvestmentsreferredtointhismaterialandtheincomefromthemmaygodownaswellasup,andinvestorsmayrealizelossesonanyinvestments.Pastperformanceisnotaguidefor
futureperformance,futurereturnsarenotguaranteedandalossoforiginalcapitalmayoccur.

NOTES

Withmarginfearsallayedat
HCLT, thestockhasalreadyseenanupck;triggersto
further
MOStanditsaffiliatesareafullservice,integratedinvestmentbanking,investmentmanagement,brokerageandfinancinggroup.Weandouraffiliateshaveinvestmentbankingandotherbusinessrelationships
withasome
companiescoveredbyourResearchDepartment.Ourresearchprofessionalsmayprovideinputintoourinvestmentbankingandotherbusinessselectionprocesses.InvestorsshouldassumethatMOStand/oritsaffiliatesare
upsidelieinsustained
organic
growthdeliveryaeranimpressive1Qperformance.
seekingorwillseekinvestmentbankingorotherbusinessfromthecompanyorcompaniesthatarethesubjectofthismaterialandthattheresearchprofessionalswhowereinvolvedinpreparingthismaterialmayeducateinvestors
oninvestmentsinsuchbusiness.Theresearchprofessionalsresponsibleforthepreparationofthisdocumentmayinteractwithtradingdeskpersonnel,salespersonnelandotherpartiesforthepurposeofgathering,applyingand
WPROs higherP/E thanHCLT,TECHMamidgrowth/marginweaknessposesa
interpretinginformation.Ourresearchprofessionalsarepaidontwin
parametersofperformance&profitability
ofMOSt.
MOStgenerallyprohibitsitsanalysts,personsreportingtoanalysts,andmembersoftheirhouseholdsfrommaintainingafinancialinterestinthesecuritiesorderivativesofanycompaniesthattheanalystscover.Additionally,MOSt
generallyprohibitsitsanalystsandpersonsreportingtoanalystsfromservingasanofficer,director,oradvisoryboardmemberofanycompaniesthattheanalystscover.Oursalespeople,traders,andotherprofessionalsoraffiliates
mayprovideoralorwrittenmarketcommentaryortradingstrategiestoourclientsthatreflectopinionsthatarecontrarytotheopinionsexpressedherein,andourproprietarytradingandinvestingbusinessesmaymakeinvestment
decisionsthatareinconsistentwiththerecommendationsexpressedherein.Inreviewingthesematerials,youshouldbeawarethatanyoralloftheforegoingamongotherthings,maygiverisetorealorpotentialconflictsofinterest.
MOStanditsaffiliatedcompany(ies),theirdirectorsandemployeesandtheirrelativesmay(a)fromtimetotime,havealongorshortpositionin,actasprincipalin,andbuyorsellthesecuritiesorderivativesthereofofcompanies
Exhibit9:
mentionedherein.(b)beengagedinanyothertransactioninvolvingsuchsecuritiesandearnbrokerageorothercompensationoractasamarketmakerinthefinancialinstrumentsofthecompany(ies)discussedhereinoractasan
advisorCorlender/borrowertosuchcompany(ies)or
ompany
Mktcap
Rang
mayhave anyotherpotentialconflictofinterestswithrespecttoanyrecommendationandotherrelatedinformation
TP(INR)Upside
EPS(INR)
P/E(x)
RoE
and opinions.howeverthesameshallhave
(%)
FY1618ECAGR (%)
nobearing
whatsoeveronthespecificrecommendationsmadebytheanalyst(s),astherecommendationsmadebytheanalyst(s)arecompletelyindependentoftheviewsoftheaffiliatesofMOSteventhoughtheremightexistaninherent
(USD b)
(%)
FY17EFY18EFY17EFY18E
FY17EFY18E
USDrev.
EPS
conflictofinterestinsomeofthestocks mentionedintheresearchreportReportsbasedontechnicalandderivativeanalysiscenteronstudyingchartscompany's pricemovement,outstanding positionsand tradingvolume,as
opposedtofocusingonacompany'sfundamentalsand,assuch,maynotmatchwithareportonacompany'sfundamentalanalysis.InadditionMOST
hasdifferentbusinesssegments/Divisionswithindependent research
TCS
77.2
Neutral
2,650
0.2
134.0
153.1
19.8
17.3
33.6
32.7
10.8 11.5
separatedbyChinesewallscateringtodifferentsetofcustomershavingvariousobjectives,riskprofiles,investmenthorizon,etc,andthereforemayattimeshavedifferentcontraryviewsonstockssectorsandmarkets.

risk.

Comparavevaluaons

Infosys

36.6

Buy

1,320

21.7

62.8

73.2

17.3

14.8

23.2

24.1

11.211.3

Unauthorizeddisclosure,use,disseminationorcopying(eitherwholeorpartial)ofthisinformation,isprohibited.ThepersonaccessingthisinformationspecificallyagreestoexemptMOStoranyofitsaffiliatesoremployeesfrom,
anyandallresponsibility/liabilityarisingfromsuchmisuseandagreesnottohold
MOSt oranyofitsaffiliatesoremployeesresponsibleforanysuchmisuseandfurtheragreestoholdMOStoranyofitsaffiliates
oremployeesfree
Wipro
19.9
Neutral
570
4.0
34.9
40.6
15.7
13.5
17.9
18.9
7.3
6.0
andharmlessfromalllosses,costs,damages,expensesthatmaybesufferedbythepersonaccessingthisinformationduetoanyerrorsanddelays.Theinformationcontainedhereinisbasedonpubliclyavailabledataorother
HCLTech
17.2
Buy
95015.0
56.3
62.8
14.7
13.2
26.3
25.1
11.4
8.3
sourcesbelievedtobereliable.AnystatementscontainedinthisreportattributedtoathirdpartyrepresentMOStsinterpretationofthedata,information
and/or opinionsprovidedbythatthirdpartyeitherpubliclyorthrougha
subscriptionservice,andsuchuseandinterpretationhavenotbeenreviewedbythethirdparty.ThisReportisnotintendedtobeacompletestatementorsummaryofthesecurities,marketsordevelopmentsreferredtointhe
TechM
7.2
Neutral
55010.7
33.8
41.3
14.7
12.0
19.8
17.6
9.6
8.5
document.Whilewewouldendeavortoupdatetheinformationhereinonreasonablebasis,MOStand/oritsaffiliatesareundernoobligationtoupdatetheinformation.Alsotheremayberegulatory,compliance,orotherreasonsthat
maypreventMOStand/oritsaffiliatesfromdoingso.MOStoranyofitsaffiliatesoremployeesshallnotbeinanywayresponsibleandliableforanylossordamagethatmayarise toanypersonfromanyinadvertenterrorin the
Source: Bloomberg,Company,MOSL
informationcontainedinthisreport.MOStoranyofitsaffiliatesoremployeesdonotprovide,atanytime,anyexpressorimpliedwarrantyofanykind,regardinganymatterpertainingtothisreport,includingwithoutlimitationthe
impliedwarrantiesofmerchantability,fitnessforaparticularpurpose,andnoninfringement.Therecipientsofthisreportshouldrelyontheirowninvestigations.
Thisreportisintendedfordistributiontoinstitutionalinvestors.Recipientswhoarenotinstitutionalinvestorsshouldseekadviceoftheirindependentfinancialadvisorpriortotakinganyinvestmentdecisionbasedonthisreportorfor
anynecessaryexplanationofitscontents.
Mostanditsassociatesmayhavemanagedorcomanagedpublicofferingofsecurities,mayhavereceivedcompensationforinvestmentbankingormerchantbankingorbrokerageservices,mayhavereceivedanycompensation
forproductsorservicesotherthaninvestmentbankingormerchantbankingorbrokerageservicesfromthesubjectcompanyinthepast12months.
Mostanditsassociateshavenotreceivedanycompensationorotherbenefitsfromthesubjectcompanyorthirdpartyinconnectionwiththeresearchreport.
SubjectCompanymayhavebeenaclientofMostoritsassociatesduringtwelvemonthsprecedingthedateofdistributionoftheresearchreport
MOStand/oritsaffiliatesand/oremployeesmayhaveinterests/positions,financialorotherwiseofover1%attheendofthemonthimmediatelyprecedingthedateofpublicationoftheresearchinthesecuritiesmentionedinthis
report.Toenhancetransparency,MOSthasincorporatedaDisclosureofInterestStatementinthisdocument.Thisshould,however,notbetreatedasendorsementoftheviewsexpressedinthereport.
MotilalOswalSecuritiesLimitedisregisteredasaResearchAnalystunderSEBI(ResearchAnalyst)Regulations,2014.SEBIReg.No.INH000000412
PendingRegulatoryinspectionsagainstMotilalOswalSecuritiesLimited:
SEBIpursuanttoacomplaintfromclientShriC.R.Mohanrajallegingunauthorizedtrading,issuedaletterdated29thApril2014toMOSLnotifyingappointmentofanAdjudicatingOfficerasperSEBIregulationstoholdinquiryand
adjudgeviolationofSEBIRegulationsMOSLrepliedtotheShowCauseNoticewherebySEBIgrantedusanopportunityofInspectionofDocuments.Sinceallthedocumentsrequestedbyuswerenotcoveredwehaverequestedto
SEBIvideourletterdatedJune23,2015toprovidependinglistofdocumentsforinspection.
ListofassociatecompaniesofMotilalOswalSecuritiesLimitedClick
heretoaccessdetailedreport

AnalystCertification
Theviewsexpressedinthisresearchreportaccuratelyreflectthepersonalviewsoftheanalyst(s)aboutthesubjectsecuritiesorissues,andnopartofthecompensationoftheresearchanalyst(s)was,is,orwillbedirectlyor
indirectlyrelatedtothespecificrecommendationsandviewsexpressedbyresearchanalyst(s)inthisreport.Theresearchanalysts,strategists,orresearchassociatesprincipallyresponsibleforpreparationofMOStresearchreceive
compensationbaseduponvariousfactors,includingqualityofresearch,investorclientfeedback,stockpicking,competitivefactorsandfirmrevenues
DisclosureofInterestStatement
Companieswherethereisinterest
Analystownershipofthestock

No

Servedasanofficer,directororemployee

No

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

38/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport
Agraphofdailyclosingpricesofsecuritiesisavailableatwww.nseindia.comandhttp://economictimes.indiatimes.com/markets/stocks/stockquotes

RegionalDisclosures(outsideIndia)
Thisreportisnotdirectedorintendedfordistributiontoorusebyanypersonorentityresidentinastate,countryoranyjurisdiction,wheresuchdistribution,publication,availabilityorusewouldbecontrarytolaw,regulationorwhich
wouldsubjectMOSt&itsgroupcompaniestoregistrationorlicensingrequirementswithinsuchjurisdictions.
ForHongKong:ThisreportisdistributedinHongKongbyMotilalOswalcapitalMarkets(HongKong)PrivateLimited,alicensedcorporation(CEAYY301)licensedandregulatedbytheHongKongSecuritiesandFutures
Commission(SFC)pursuanttotheSecuritiesandFuturesOrdinance(Chapter571oftheLawsofHongKong)SFO.AsperSEBI(ResearchAnalystRegulations)2014MotilalOswalSecurities(SEBIRegNo.INH000000412)has
anagreementwithMotilalOswalcapitalMarkets(HongKong)PrivateLimitedfordistributionofresearchreportinKongKong.ThisreportisintendedfordistributiononlytoProfessionalInvestorsasdefinedinPartIofSchedule1to
SFO.Anyinvestmentorinvestmentactivitytowhichthisdocumentrelatesisonlyavailabletoprofessionalinvestorandwillbeengagedonlywithprofessionalinvestors.Nothinghereisanofferorsolicitationofthesesecurities,
productsandservicesinanyjurisdictionwheretheirofferorsaleisnotqualifiedorexemptfromregistration.TheIndianAnalyst(s)whocompilethisreportis/arenotlocatedinHongKong&arenotconductingResearchAnalysisin
HongKong.

ForU.S
MotilalOswalSecuritiesLimited(MOSL)isnotaregisteredbrokerdealerundertheU.S.SecuritiesExchangeActof1934,asamended(the"1934act")andunderapplicablestatelawsintheUnitedStates.InadditionMOSLisnota
registeredinvestmentadviserundertheU.S.InvestmentAdvisersActof1940,asamended(the"AdvisersAct"andtogetherwiththe1934Act,the"Acts),andunderapplicablestatelawsintheUnitedStates.Accordingly,inthe
absenceofspecificexemptionundertheActs,anybrokerageandinvestmentservicesprovidedbyMOSL,includingtheproductsandservicesdescribedhereinarenotavailabletoorintendedforU.S.persons.
Thisreportisintendedfordistributiononlyto"MajorInstitutionalInvestors"asdefinedbyRule15a6(b)(4)oftheExchangeActandinterpretationsthereofbySEC(henceforthreferredtoas"majorinstitutionalinvestors").This
documentmustnotbeactedonorreliedonbypersonswhoarenotmajorinstitutionalinvestors.Anyinvestmentorinvestmentactivitytowhichthisdocumentrelatesisonlyavailabletomajorinstitutionalinvestorsandwillbe
engagedinonlywithmajorinstitutionalinvestors.InrelianceontheexemptionfromregistrationprovidedbyRule15a6oftheU.S.SecuritiesExchangeActof1934,asamended(the"ExchangeAct")andinterpretationsthereofby
theU.S.SecuritiesandExchangeCommission("SEC")inordertoconductbusinesswithInstitutionalInvestorsbasedintheU.S.,MOSLhasenteredintoachaperoningagreementwithaU.S.registeredbrokerdealer,MotilalOswal
SecuritiesInternationalPrivateLimited.("MOSIPL").Anybusinessinteractionpursuanttothisreportwillhavetobeexecutedwithintheprovisionsofthischaperoningagreement.
TheResearchAnalystscontributingtothereportmaynotberegistered/qualifiedasresearchanalystwithFINRA.SuchresearchanalystmaynotbeassociatedpersonsoftheU.S.registeredbrokerdealer,MOSIPL,andtherefore,
maynotbesubjecttoNASDrule2711andNYSERule472restrictionsoncommunicationwithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.
ForSingapore
MotilalOswalCapitalMarketsSingaporePteLimitedisactingasanexemptfinancialadvisorundersection23(1)(f)oftheFinancialAdvisersAct(FAA)readwithregulation17(1)(d)oftheFinancialAdvisorsRegulationsandisa
subsidiaryofMotilalOswalSecuritiesLimitedinIndia.ThisresearchisdistributedinSingaporebyMotilalOswalCapitalMarketsSingaporePteLimitedanditisonlydirectedinSingaporetoaccreditedinvestors,asdefinedinthe
FinancialAdvisersRegulationsandtheSecuritiesandFuturesAct(Chapter289),asamendedfromtimetotime.
InrespectofanymatterarisingfromorinconnectionwiththeresearchyoucouldcontactthefollowingrepresentativesofMotilalOswalCapitalMarketsSingaporePteLimited:
VarunKumar
Varun.kumar@motilaloswal.com
Contact:(+65)68189232
OfficeAddress:21(Suite31),16CollyerQuay,Singapore04931

MolalOswalSecuriesLtd

7December2016

MolalOswalTower,Level9,SayaniRoad,Prabhadevi,Mumbai400025
InvestorsareadvisedtoreferthroughPhone: importantdisclosuresmadeatthe
+912239825500Email:reports@molaloswal.com

MolalOswalresearchisavailableon

www.molaloswal.com/InstuonalEquies,

lastpageoftheResearchReport.

Bloomberg,ThomsonReuters,FactsetandS&PCapital.

MolalOswalWealthCreaonStudyGallery

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

39/40

12/14/2016

21stAnnualWealthCreationStudy(20112016)DetailedReport

http://www.motilaloswal.com/site/rreports/HTML/636171340589512309/index.htm

40/40