India’s Top Groups Create Rs 6 Lakh Crore In Investor Wealth In Two Months

In a move to boost corporate profit growth, kick-start private investment cycle and make the nation a more competitive investment destination, the Narendra Modi government on Sept. 19 announced a cut in the headline corporate tax rate on domestic companies to 22 percent from 30 percent. Moreover, in the quarter ended September, operating income of nearly half of the Nifty 50 constituents met estimates and around a third surpassed analyst expectations after two straight quarters of muted performance. That best-in-two-year performance only added to the rally fuelled by tax bonanza.

Among the 11 large groups analysed by BloombergQuint, nine generated returns with five beating the benchmark during the period. Two saw their market capitalisation decline.

RIL, Rahul Bajaj group and HDFC Group were among the top gainers, while Zee Group and RP-Sanjiv Goenka Groups were the losers.

Here’s how India’s biggest conglomerates fared since Sept. 19:

Reliance Industries

Mukesh Ambani-led Reliance Industries group’s market capitalisation increased by over Rs 2,30,000 crore in the last two months led by its flagship company Reliance Industries Ltd. The increase in share prices of RIL was mainly on the back of strong financial performance of its consumer-facing businesses—Reliance Jio Infocomm Ltd. and Reliance Retail Ltd.

Shares of the two recently acquired cable aggregators—Hathway Cable Datacom Ltd. and Den Networks Ltd.—declined the most among group companies.

Bajaj Group

Among the Bajaj group, Sanjiv Bajaj-led Bajaj Finserv Ltd. has given the highest return in the last two months. The company owns 55 percent stake in Bajaj Finance Ltd. and 74 percent stake in general and life insurance companies. The company’s life insurance arm has tied up with Axis Bank Ltd. as a distribution partner. Bajaj Finance was the second biggest gainer among the group, largely on the back of growth in asset under management and stable asset portfolio.

Shares of the Rajiv Bajaj-led Bajaj Auto Ltd. also managed to gain close to 15 percent on better-than-industry vehicles sales volume and a strong operational performance in the second quarter.

HDFC Group

All the HDFC group companies gained in the last two months, taking the group’s market capitalisation up by close to Rs 1,64,000 crore. HDFC Asset Management Company Ltd. managed to gain the most on the back of steady flows into systematic investment plans, pass through impact of reduced total expense ratio, strong financial performance and tax cuts.

HDFC Bank Ltd.’s stock was the second biggest gainer on the back of strong financial performance and stable asset quality.

Adani Group

Adani Green Energy Ltd. – builder and operator of solar and wind energy power plants in India – is the top gainer among the Adani Group companies on the back of strong financial performance and growth prospects. The company reported a net profit of Rs 102 crore in the quarter ended September compared with a loss of Rs 188 crore in the same period last year. It was aided by increased operating capacities. The group has recently won several bids to build and operate power projects, which once implemented, will increase the group’s operational capacity by over two times to 5,290 megawatts.

Adani Enterprises Ltd. was the second top gainer with gains of over 40 percent, while Adani Power Ltd. was the only loser.

Aditya Birla Group

The Kumar Mangalam Birla-led group’s market capitalisation increased by Rs 24,000 crore largely led by UltraTech Cement Ltd. and its holding company—Grasim Industries Ltd. Share prices of Vodafone Idea Ltd. gained the most on tariff hike announcements and relief provided by the government.

Aditya Birla Fashion and Retail Ltd. was the second biggest gainer on higher same-store sales growth and improving margins. Grasim rose as capital allocation concerns eased, while UltraTech gained on expansion plans in the East region.

Mahindra Group

Mahindra Group’s market increased by 7 percent in the last two months led by Mahindra & Mahindra Ltd. and Tech Mahindra Ltd. M&M’s market jumped on the back of a strong growth outlook for tractors and robust financial performance due to cost cuts. Tech Mahindra’s large deal wins and healthy order pipeline aided the information technology company’s market capitalisation.

Mahindra Logistics Ltd. gained the most as the company focuses more on non-auto segments and -added services which generate higher margins.

Godrej Group

Godrej Industries Ltd.—the holding company—was among the top gainer for the group. Godrej Consumer Products Ltd.’s market cap jumped the most by absolute in the last two months on the back of strong financial performance in the second quarter of financial year 2020. The company also increased its focus on new launches to beat the consumption slowdown.

Godrej Properties Ltd. dropped 5 percent as its second-quarter earnings not only missed estimates but its free cash flow turned negative.

Tata Group

The Tata Group’s market capitalisation increased by more than Rs 35,000 crore, largely on the back of Tata Motors Ltd. and Tata Steel Ltd. Of the major 23 listed Tata companies, shares of only five declined.

Tata Motors gained the most as the company’s luxury car unit Jarguar Land Rover showed signs of improvement in the quarter ended September . Tata Elxsi Ltd.’s shares also rose on the back of JLR improvement as it generates nearly a fifth of its revenue from the British carmaker.

Tata Power Ltd. was the top loser as the company’s debt remained elevated due to continuing capital expenditure and stretched receivables for its renewable portfolios. Along with this, the upcoming new regulations for Indonesian coal mines was also an overhang.

RPG Group

Among the Harsh Goenka-led RPG Group, shares of RPG Life Sciences Ltd. rose the most as its net profit jumped over fourfold due to lower raw material prices in the quarter ended September. Its engineering, procurement and construction company—KEC International Ltd.—gained as it expects fresh orders to pick up in the second half of financial year 2019-20.

Harrisons Malayalam Ltd.’s continued to decline due to unabated rains, which led to lower rubber production.

RP-Sanjiv Goenka Group

Only Saregama India Ltd. and Phillips Carbon Black Ltd. returned gains, while the shares prices of the remaining four companies of the RP-Sanjiv Goenka Group declined since Sept. 19.

Share prices of Saregama India rose as it returned to profitability in the quarter ended September. Sales of Carvaan, its portable digital audio player, rose in double digits. Shares of Firstsource Solutions Ltd. declined by a fifth due to a change in the company’s leadership. It incurred a one-time cost of Rs 17 crore related to recruitment of new chief executive officer and due to an exit cost of the departing CEO.

Zee Group

Barring Zee Learn Ltd., stocks of all the Zee group companies declined on concerns about shares offered as a collateral by promoters to raise debt. That overhang was removed as Essel Group decided to sell additional 6.5 percent stake in Zee Entertainment Enterprises Ltd. to financial investors to pare debt, bringing the promoter holding down to 5 percent. The group’s market , however, has declined by Rs 824 crore since Sept. 19, mainly because of the fall in shares of its DTH arm Dish TV India Ltd.