Thematic Study | December 2019
24
th
ANNUAL WEALTH CREATION STUDY
(2014-2019)
Management Integrity
Understanding Sharp Practices
HIGHLIGHTS
In equity investing, management is 90%, industry 9% and 1% everything else. Hence,
getting Management Integrity right is the critical first step.
There’s only one way of writing honest accounts, and infinite ways of manipulating
them.
Most Sharp Practices are to inflate profits and stuff the “financial trash” in the Balance
Sheet (Credit P&L, Debit Balance Sheet).
Profit & Loss statement is easier to manipulate; hence, managements must be
statutorily asked to present a simplified Free Cash Flow statement.
Auditors must be made more accountable to minority shareholders to avoid Sharp
Practices by the management.
As an investor, have a forensic mindset to get management’s explanation for all the
perceived Sharp Practices.
Finally, interact with various stakeholders – customers, employees, suppliers,
competitors, etc – till you arrive at a moment of Management Integrity.
“The best defence against fraudsters is to run away from them as fast as possible at the first hint
of sharp practice. With more than 50,000 different stocks available to investors in this country, it
is not only unnecessary but downright stupid to buy into a company run by men of doubtful
integrity.”
(Thomas Phelps, in his book, 100 to 1 in the stock market)
TOP 10 WEALTH CREATORS (2014-2019)
THE BIGGEST
Rank
Company
1
2
3
4
5
6
7
8
9
10
Reliance Industries
HDFC Bank
TCS
Hindustan Unilever
HDFC
Kotak Mahindra Bank
Bajaj Finance
Infosys
Maruti Suzuki
Axis Bank
Wealth
Created
(INR bn)
5,636
4,085
3,655
2,391
1,800
1,795
1,594
1,497
1,420
1,209
THE FASTEST
Company
Indiabulls Ventures
Bajaj Finance
Bombay Burmah
Aarti Industries
Sundram Fasteners
Bajaj Finserv
Atul
Rajesh Exports
Honeywell Auto
Britannia Industries
5-year
Price
CAGR (%)
78
76
68
67
55
55
52
49
49
49
THE MOST CONSISTENT
Company
IndusInd Bank
Pidilite Industries
Titan Company
Shree Cement
Asian Paints
Kotak Mahindra Bank
Godrej Consumer
TCS
HDFC Bank
LIC Housing Finance
Appeared
in WC
Study (x)
10
10
10
10
10
10
10
10
10
10
10-Year
Price
CAGR (%)
49
40
40
39
34
34
32
31
28
28
Raamdeo Agrawal
(Raamdeo@MotilalOswal.com) /
Shrinath Mithanthaya
(ShrinathM@MotilalOswal.com)
We thank Mr Dhruv Mehta (Dhruv.Mehta@dhruvmehta.in), Investment Consultant, for his invaluable contribution to this report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
Investors are advised to refer through important disclosures made at the last page of the Research Report.
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Motilal Oswal 24th Annual Wealth Creation Study
Page
Wealth Creation Study:
Objective, Concept & Methodology
....................... 1
Wealth Creation 2014-19:
Highlights
.......................................................... 2-3
Theme 2020:
Management Integrity: Understanding sharp practices
... 4-27
Wealth Creation 2014-19:
Detailed Findings
......................................... 28-45
Appendix 1:
MOSL 100 – Biggest Wealth Creators
................................ 46-47
Appendix 2:
MOSL 100 – Fastest Wealth Creators
................................ 48-49
Appendix 3:
MOSL 100 – Wealth Creators (alphabetical)
.......................... 50
Abbreviations and Terms used in this report
Description
Reference to years for India are financial year ending March, unless otherwise stated
Average
Compound Annual Growth Rate
Loss to Profit / Profit to Loss. In such cases, calculation of PAT CAGR is not possible
Indian Rupees in billion
In the case of aggregates, Price CAGR refers to Market Cap CAGR
Wealth Created
Increase in Market Capitalization over the last 5 years, duly adjusted for corporate
Wealth Created
actions such as fresh equity issuance, mergers, demergers, share buybacks, etc.
Note:
Capitaline database has been used for this study. Source of all exhibits is MOSL analysis, unless otherwise stated
Abbreviation / Term
2009, 2014, 2019, etc
Avg
CAGR
L to P / P to L
INR b
Price CAGR
WC
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Wealth Creation Study
Objective, Concept & Methodology
Objective
The foundation of Wealth Creation is to buy businesses at a price substantially lower than their
“intrinsic value” or “expected value”. The lower the market value compared to the intrinsic value,
the higher is the margin of safety. Every year, as in the past 23 years, we endeavor to cull out the
characteristics of businesses that create value for their shareholders.
As Phil Fisher says, “It
seems logical that even before thinking of buying any common stock, the
first step is to see how money has been most successfully made in the past.”
Our Wealth Creation
Studies are attempts to study the past as a guide to the future, and gain insights into the various
dynamics of stock market investing.
Concept & Methodology
Wealth Creation is the process by which a company enhances the market value of the capital
entrusted to it by its shareholders. It is a basic measure of success for any commercial venture.
For listed companies, we define Wealth Created as the difference in market capitalization over a
period of last five years, duly adjusted for corporate events such as fresh equity issuance,
mergers, demergers, share buybacks, etc.
We rank the top 100 companies in descending order of absolute Wealth Created,
subject to the
company’s stock price at least outperforming the benchmark index (BSE Sensex in our case).
These top 100 Wealth Creators are also ranked according to speed (i.e. price CAGR during the
period under study).
Report structure
We present the 2014-2019 Wealth Creation Study highlights in pages 2-3. The detailed findings
are presented in pages 28-45. Appendix 1 (pages 46-47) ranks the top 100 Wealth Creators by
size, and Appendix 2 (pages 48-49) ranks the same 100 Wealth Creators by speed.
This year’s theme study titled “Management
Integrity – Understanding Sharp Practices”
is
featured in pages 4-27.
December 2019
1
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Wealth Creation 2014-2019
Highlights
Reliance Industries smashes all records as the Biggest Wealth Creator
After a gap of 7 years,
Reliance Industries
has once again emerged as the biggest Wealth
Creator over 2014-19. As Exhibit 4 on page 30 suggests, the INR 5.6 trillion wealth created by
Reliance is the highest ever so far by a huge margin.
Exhibit 1
Top 10 Biggest Wealth Creators (2014-19)
Rank Company
1 Reliance Inds
2 HDFC Bank
3 TCS
4 Hind. Unilever
5 HDFC
6 Kotak Mahindra
7 Bajaj Finance
8 Infosys
9 Maruti Suzuki
10 Axis Bank
Total of Top 10
Total of Top 100
Wealth Created
INR bn % share
5,636
11.5
4,085
8.3
3,655
7.5
2,391
4.9
1,800
3.7
1,795
3.7
1,594
3.3
1,497
3.1
1,420
2.9
1,209
2.5
25,081
51
49,048
100
CAGR (%)
Price
PAT
24
14
25
21
13
11
23
12
17
15
28
24
76
41
13
7
28
19
22
-4
22
13
23
15
P/E (x)
2019 2014
22
15
28
21
24
22
60
36
21
17
35
24
44
12
21
18
34
24
40
11
27
19
25
18
RoE (%)
2019 2014
10
10
15
20
35
39
79
102
15
21
12
13
20
18
23
24
13
12
7
16
15
18
15
16
Indiabulls Ventures is the Fastest Wealth Creator for the second consecutive year
For the second study in a row,
Indiabulls Ventures
has emerged as the Fastest Wealth
Creator, with 2014-19 stock price multiplier of 18x (78% CAGR).
Bajaj Finance
has the unique distinction of being present in the top 10 list of both – the
biggest and the fastest.
INR 1 million invested equally among the top 10 fastest Wealth Creators in 2014 would have
grown to INR 11 million in 2019; return CAGR of 61% v/s barely 12% for the Sensex.
Exhibit 2
Top 10 Fastest Wealth Creators (2014-19)
Rank Company
1
2
3
4
5
6
7
8
9
10
Indiabulls Ventures
Bajaj Finance
Bombay Burmah
Aarti Industries
Sundram Fasteners
Bajaj Finserv
Atul
Rajesh Exports
Honeywell Auto
Britannia Industries
Price Appn.
(x)
18
17
13
13
9
9
8
7
7
7
CAGR (%)
Price
PAT
78
76
68
67
55
55
52
49
49
49
35
41
36
26
31
16
14
29
33
25
Mkt Cap (INR bn)
2019
2014
197
1,748
91
136
119
1,120
106
197
197
741
4
90
7
11
13
126
13
26
27
101
P/E (x)
2019
2014
43
44
10
28
26
35
25
15
55
64
4
12
4
7
11
8
6
7
31
26
IndusInd Bank is the Most Consistent Wealth Creator
IndusInd Bank
has emerged the Most Consistent Wealth Creator by virtue of –
1. Appearing among the top 100 Wealth Creators in each of the last 10 studies; and
2. Recording the highest Price CAGR of 49% over the 10-year period 2009 to 2019.
2
December 2019
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Exhibit 3
Top 10 Most Consistent Wealth Creators (2009-19)
Rank
1
2
3
4
5
6
7
8
9
10
Company
IndusInd Bank
Pidilite Industries
Titan Company
Shree Cement
Asian Paints
Kotak Mahindra
Godrej Consumer
TCS
HDFC Bank
LIC Housing
Appeared in 10-yr Price 10-yr PAT
WC Study (x) CAGR (%) CAGR (%)
10
49
35
10
40
24
10
40
23
10
39
7
10
34
18
10
34
27
10
32
29
10
31
20
10
28
26
10
28
16
P/E (x)
2019 2009
33
7
67
19
72
20
57
4
67
19
35
15
33
20
24
10
28
18
11
4
RoE (%)
2019 2009
13
12
23
16
23
31
12
49
23
33
12
10
29
30
35
33
15
15
15
24
Financials is the biggest Wealth Creating sector for the third consecutive year
Financials
has emerged as India’s biggest Wealth Creating sector over 2014-19 for the third
consecutive year. The surge in Wealth Creation in the sector has been led by private banks
and NBFCs.
Exhibit 4
Financials is the top Wealth Creating sector
Sector
(No of companies)
Financials (23)
Consumer/Retail (21)
Oil & Gas (6)
Technology (5)
Auto (12)
Healthcare (6)
Metals / Mining (2)
Cement (3)
Capital Goods (4)
Utilities (1)
Telecom (1)
Others (16)
Total
WC Share of WC %
(INR bn) 2019
2014
15,899 32
19
8,813 18
20
7,800 16
1
5,715 12
24
3,216
7
11
1,607
3
9
1,083
2
2
1,074
2
4
850
2
4
487
1
-
88
0
2
2,417
5
2
49,048 100
100
CAGR 14-19 (%)
Price
PAT
27
12
25
15
23
18
12
10
26
23
29
22
19
19
18
6
31
16
14
22
15 P to L
28
20
23
15
P/E (x)
2019
2014
28
15
53
36
16
13
22
20
28
25
31
23
12
12
48
29
31
17
8
12
–
112
30
22
25
18
RoE (%)
2019
2014
12
17
29
33
13
11
29
30
15
13
12
12
22
11
9
12
18
15
21
13
–
10
15
14
15
16
Payback Ratio < 1x and PEG < 1x remain solid formulas for superior returns
Every Wealth Creation Study invariably suggests that
Payback Ratio < 1x
is the most reliable
valuation metric for supernormal returns. (Payback is a proprietary ratio of Motilal Oswal,
defined as current market cap divided by estimated profits over the next five years. For 2014,
we calculate this ratio based on market cap as on 31-Mar-2014 divided by the actual profits
reported over the next five years).
PEG (P/E to Growth ratio)
is obtained by dividing trailing 12-month P/E by future 5-year
earnings CAGR. We have used perfect foresight of 5 years’ earnings to calculate PEG. Thus, if
a stock’s P/E in 2014 was 20x, and its 2014-19 PAT CAGR is 25%, its 2014 PEG works out to
0.8x (20 ÷ 25).
For detailed findings of 2014-19 Wealth Creation Study, please see pages 28-45.
December 2019
3
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Theme 2020
December 2019
4
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Management Integrity
Understanding sharp practices
“In evaluating a common stock, the management is 90 per cent, the industry is 9 per cent, and
all other factors are 1 per cent.“
— Philip Fisher in his book Paths to Wealth Through Common Stocks
1. Backdrop
Why study Management Integrity
Consider the following simple exercise. We checked the status of all the companies listed on the
Bombay Stock Exchange 5 years ago vis-à-vis today. A relevant snapshot of the results is tabled
below. In just a short span of 5 years, almost one-third of stocks lost market value of 70% or more.
Exhibit 1
Massive market value erosion in one-third of listed companies
Total companies listed in Dec-2014
No longer listed in Dec-2019
Stock price down 90-100%
Stock price down 80-90%
Stock price down 70-80%
Total of above
% of total stocks listed in Dec-2014
3,440
594
209
169
132
1,104
32%
True, in many cases, the sharp erosion in stock prices is due to business downturn. But there are
quite a few names in the list where the reason was primarily related to corporate governance
issues.
At Motilal Oswal, our investment process is captured by the acronym
QGLP
–
Quality
of business
and of management),
Growth
in earnings,
Longevity
of both quality and growth, and at
reasonable
Price.
In the past 23 Wealth Creation Studies, we have covered most aspects related
to QGLP.
Exhibit 2
Some of our recent Wealth Creation Studies covering Quality of Business, Growth, Longevity and Price
Economic Moat
December 2019
100x
CAP & GAP
Valuation Insights
5
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Exhibit 3
Motilal Oswal’s QGLP investment philosophy – At a glance
QGLP – Quality, Growth, Longevity, reasonable Price
Quality of business x Quality of management
•
•
•
•
•
Stable business, preferably consumer facing
Huge business opportunity
Sustainable competitive advantage
Competent management team
Healthy financials & ratios
Growth in earnings
•
•
•
•
•
Volume growth
Price growth
Mix change
Operating leverage
Financial leverage
QGLP
Price
•
•
Reasonable valuation, relative to
quality and growth prospects
High margin of safety
Longevity of Quality & Growth
•
•
•
Long-term relevance of business
Extending competitive advantage
period
Sustenance of growth momentum
We dedicate the current study to
Quality of Management.
Even here, we have 3 metrics to
assess Quality of Management –
1. Unquestionable Integrity
2. Demonstrable competence and
3. Growth mindset.
By now, we have sufficient experience to know that when investors get stuck with companies
where Management Integrity comes under question, it’s literally a race to zero! Hence, this study
looks into a few key aspects related to management integrity e.g. –
The motivations behind compromised integrity,
The quantitative signals of suspect Management Integrity with relevant examples, and
Finally, a few Indian case studies where Management Integrity was seemingly compromised.
2. What is Management Integrity
Honesty and a sense of trusteeship towards all stakeholders
Wikipedia offers the best definition of Integrity, and is worth reproducing here –
“Integrity is the practice of being honest and showing a consistent and uncompromising
adherence to strong moral and ethical principles and values. In ethics, integrity is regarded as the
honesty and truthfulness or accuracy of one's actions … The word integrity evolves from the Latin
adjective integer, meaning whole or complete. In this context, integrity is the inner sense of
‘wholeness’ deriving from qualities such as honesty and consistency of character. As such, one
may judge that others ‘have integrity’ to the extent that they act according to the values, beliefs
and principles they claim to hold.”
When a company abides by this definition, it can be said to have Management Integrity.
December 2019
6
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
The two key words in the above definition are “Practice” and “Wholeness” –
Practice
– Clearly, Management Integrity should be seen in practice (i.e. behavior) and not
simply be a part of the statement of its corporate value system.
Wholeness
– This defines the scope of Management Integrity i.e. the company needs to be
honest, fair and consistent towards
all
its stakeholders, namely, employees, customers,
suppliers, shareholders, government, and the community at large.
In light of the above, for the purpose of equity investing, Management Integrity can be defined
as dealing with all company stakeholders honestly and with a sense of trusteeship. This may be
reflected as shown in Exhibit 4.
Exhibit 4
Management Integrity in a nutshell
Stakeholder
Corporate Parent /
Founders
Senior Management
Company behavior
No or minimal conflict of interest (e.g. royalty for brand, technology)
No or minimal related party transactions
Reasonable compensation relative to company median
Calibrated stock options
Courtesy and respect for all employees
Adequate opportunity for personal and professional development
Fostering sense of ownership through calibrated stock options
Offering products and/or services matching customer expectations
Retaining customers through appropriate loyalty programs
Fair dealing on post-sale commitments e.g. warranties, repairs, etc
Maintaining fair terms of trade
Collaborating for innovations, where relevant
Presenting a true and fair view of the company's affairs through
annual and interim reports
Maintaining a rational policy of payouts (dividends and/or buybacks)
Timely paying due taxes, both direct and indirect
Abiding by the law of the land in all matters
Pursuing an active Corporate Social Responsibility program
Ensuring compliance with all community norms e.g. effluent-
treatment, waste management, etc
Employees
Customers
Suppliers
Shareholders
Government
Community &
Environment
3. Why Management Integrity is critical
Else, it’s an eventual race to zero
In our QGLP investment process, all the elements are multiplicative rather than additive i.e. even
if one of them is zero the product is zero. Thus, Q or Quality is Quality of Business x Quality of
Management.
December 2019
7
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
As stated earlier, we evaluate Quality of Management by 3 metrics –
1. Unquestionable Integrity
2. Demonstrable competence and
3. Growth mindset.
For the sake of simplicity, we may combine Growth mindset as a sub-element of Demonstrable
Competence itself. In which case, we can draw up a Management Integrity-Management
Competence grid as shown in Exhibit 5. Only those companies which rank high on both Integrity
and Competence need to comprise the investment universe of equity investors.
Exhibit 5
Management Integrity-Competence grid
High
Competence Traps
(Race to Zero)
INVESTMENT UNIVERSE
(Enduring Wealth Creators)
Management
Competence
Low
Obvious Avoids
(Wealth Destroyers)
Integrity Traps
(Market performers at best)
Low
High
Management Integrity
Note that it’s very important to distinguish between integrity and competence. All business
failures are not due to low integrity. There may be adverse business externalities, cases of lack of
competence, and even genuine business mistakes such as an ill-timed capacity expansion or
acquisition.
Maintaining high level of integrity is highly beneficial for all stakeholders including the owners
and senior management, as the market rewards them by way of premium valuations. And yet,
managements are motivated to compromise on integrity. The next section examines why.
December 2019
8
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
4. Why Management Integrity gets compromised
The lure of the lucre
Empirical evidence suggests that Management Integrity is mainly compromised to present a
favorable view of the company to the equity markets. Such attempts to “manage stock prices”,
in turn, is motivated by several reasons such as –
Growth mania:
A widespread reason for Sharp Practices is to demonstrate – even
manufacture – growth. Such is the mania for growth not only with entrepreneurs but also
with investors. In fact, the latter many times rubs off on the former.
Raising equity capital:
Many businesses (especially the Financials sector) need regular
infusion of equity for growth. In such cases, higher the stock price, the better it is for
incumbent shareholders.
Compensation linked to stock performance:
Many senior managers’ compensation is linked
to the stock price performance. Hence, it is in their interest to maintain elevated stock prices.
ESOPs:
Many senior managers hold ESOPs in their respective companies. High stock prices
are in their interests too.
Using market cap as currency:
Companies with a high-growth mindset use their market cap
currency to acquire businesses via equity swap rather than cash purchases.
Personal wealth enhancement / Halo of market cap:
High market cap significantly enhances
the worth of entrepreneurs in any social setting. Further, some entrepreneurs would also be
in contention for the global pecking order of the wealthiest individuals.
Apart from stock price management, occasionally there may be other motivators like meeting
debt covenants, maintaining credit ratings, meeting stock market expectations of previously
given guidance, and a penchant for tax evasion, to name a few.
5. When does Management Integrity typically get compromised
No checks and balances
Management Integrity typically gets compromised when the following conditions prevail –
Weak Board of Directors,
which fails to challenge the senior management on issues like
accounting policy, related party transactions, senior management compensation, etc.
Management teams devoid of checks and balances,
invariably led by an alpha leader who
takes all major corporate decisions.
Auditors lacking objectivity, independence and due diligence.
Where does comprised Management Integrity reflect? Enter … Sharp Practices!
When Management Integrity is compromised it uses all tricks in the trade to present a rosy
picture of its affairs when in fact it isn’t. It does this by resorting to what are called Sharp Practices.
December 2019
9
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
6. What are Sharp Practices?
Only one right way to present accounts, infinite ways to manipulate them
Sharp Practices may be defined as “ways of behaving, especially in business, that are dishonest
but not illegal.” However, once the management starts resorting to Sharp Practices, it’s what
Satyam Computer founder B Ramalinga Raju wrote in his fraud confession letter, “like riding a
tiger, not knowing how to get off without being eaten” (letter reproduced in full as a Case Study
#1 Annexure, page 21). It’s tough to say when a Sharp Practice degenerates into an intentional
fraud (see box below).
Conservative Accounting, Neutral Accounting, Aggressive Accounting & Fraud
Steve Albrecht, professor at Brigham Young University, talks of four approaches in accounting,
basis their proximity to presenting a true and fair view of a company’s affairs –
1. Conservative Accounting – erring on the side of caution
2. Neutral Accounting – presenting as close to reality as possible
3. Aggressive Accounting – taking liberties with accounting norms and management policies
4. Intentional Fraud – deliberate misuse of accounting to present a false picture.
Example: Say, a company sells a hair-dryer for INR 5,000 and offers a one-year warranty on
it. Past records suggest that the warranty costs incurred works out to INR 100 to INR 300 per
dryer sold. The following’s how the company would provide for warranty costs per dryer sold,
depending on the accounting style it chooses to adopt –
Conservative Accounting
: INR 300 (the maximum possible)
Neutral Accounting
: INR 200 (average of 100 and 300)
Aggressive Accounting
: INR 100 (minimum possible)
Fraud
: Perhaps zero (to be incurred only on actuals)
As Warren Buffett has said, “Weak companies do weak accounting.” It’s very important for
investors to know the accounting approach of the companies that they have invested in.
We see two major kinds of Sharp Practices by companies with compromised integrity –
(1) Accounting related and
(2) Non-accounting related.
We cover some of them in this study. It’s important to know that
there’s only one right way of
presenting a true and fair view of a company’s affairs and infinite ways of not doing so.
Hence,
our examples covered here will be more illustrative than comprehensive.
Note that all the initial Sharp Practices covered here pertain to non-Financial sectors i.e. where
money changes form – cash to raw material to finished goods to sales and back to cash. Further,
there’s also capital expenditure. Unlike this, in the Financials sector, money retains its form all
through the business. This makes it that much more difficult to identify Sharp Practices. Thus,
establishing Management Integrity in the Financials Sector is that much more qualitative in
nature. We cover some of the Financials sector’s Sharp Practices in section 7.
December 2019
10
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
6.1 Accounting Sharp Practices – the backdrop
“I can’t afford the operation, but would you accept a small payment to touch up the x-ray?“
— Warren Buffett
Authors Howard Schilit, Jeremy Perler and Yoni Engelhart use the above quote in their book
“Financial
Shenanigans”.
A company’s financial statements are the x-ray of its financial health.
Through his quote, Buffett warns investors about companies that try to hide their true and fair
financial view by merely “touching up” the financial statements. Buffett goes on to add, “In the
long run, however, trouble awaits managements that paper over operating problems with
accounting maneuvers. Eventually, managements of this kind achieve the same result as the
seriously ill patient.”
Schilit
et al
identify two broad categories of accounting shenanigans or Sharp Practices –
1. Earnings manipulation
2. Cash Flow shenanigans.
The authors also present an interesting backdrop to the whole issue of Sharp Practices. In 1988,
there was a Hollywood comedy hit,
Twins.
The twins were born in a genetics lab as the result of
a secret experiment to create the perfect child. Thus, one of the twins gets all the desirable traits
while the other gets the “genetic trash”.
The relationship between Earnings and Cash Flow is somewhat similar. Companies try their
utmost to present the best Earnings position, only to dump all the “financial trash” into the
Balance Sheet, reflecting in Cash Flow. The double-entry accounting term for this is –
Credit P&L A/c, Debit Balance Sheet
We will touch upon this through the course of our discussion on the various Sharp Practices.
Even here, there are two components of the Balance Sheet debit side (i.e. asset side) –
1. Working Capital and
2. Fixed Capital.
Items credited in P&L but charged to Working Capital side (e.g. Debtors) gets captured in
Operating Cash Flow. Smart investors know this, and hence, closely monitor Operating Cash Flow
in addition to profits. This has caused companies to get smarter. They now charge operating
outflows to the Fixed Capital side so that even Operating Cash Flow stays robust. And to complete
the cycle, resort to a lower depreciation policy so that the loading up of the Fixed Capital side too
doesn’t hurt P&L. The example which follows will make the above point clear.
EXAMPLE:
This hypothetical example presents P&L, Balance Sheet and Cash Flow Statement in 3 cases –
1.
True Case
i.e. how the books should actually have been in Year 1 compared to Year 0
2.
Case A of Sharp Practice 1 in Year 1,
inflating Sales by 200 in the P&L and Debtors by 200 in
the Balance Sheet
3.
Case B of Sharp Practice 2 in Year 1,
capitalizing R&D costs of 200.
December 2019
11
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
The P&L, Balance Sheet and Cash Flow Statement of all these 3 cases will appear as follows –
Exhibit 6
P&L Statement
Year 0
Sales
Less:
Raw material costs
Other costs
R&D cost
Total costs
EBITDA
Depreciation
EBIT
Interest
Profit before tax
Tax @ 25%
Profit after tax
Change over True Case
900
Year 1
True Case A:
Case
SP 1*
1,000
1,200
Case B:
SP 2**
1,000
Notes
Sales inflated by 200 in Case A
450
180
100
730
170
25
145
15
130
33
98
500
200
200
900
100
30
70
20
50
13
38
500
200
200
900
300
30
270
20
250
63
188
400%
500
200
0
700
300
30
270
20
250
63
188
400%
R&D capitalized by 200 in Case B
PBT higher by 200 in both cases
Profits same in both cases but
significantly inflated
* SP 1 – Sharp Practice 1 i.e. inflating Sales and Debtors by 200
** SP 2 – Sharp Practice 2 i.e. capitalizing R&D costs of 200
Exhibit 7
Balance Sheet
Year 0
True
Case
300
500
38
538
838
123
960
800
100
0
900
230
670
350
150
40
540
250
290
960
Equity capital
Opening Reserves
Add: Current year's profit
Closing Reserves
Net Worth
Debt
Total Capital Employed
Opening Fixed Assets
Add: This year's Capex
R&D capitalized
Closing Fixed Assets
Accumulated depreciation
Net Fixed Assets
Debtors
Inventory
Cash
Total Current Assets
Creditors
Net Current Assets
Total Assets
December 2019
300
403
98
500
800
60
860
700
100
0
800
200
600
300
200
30
530
270
260
860
Year 1
Case A:
SP 1
300
500
188
688
988
173
1,160
800
100
0
900
230
670
550
150
40
740
250
490
1,160
Case B:
SP 2
300
500
188
688
988
173
1,160
800
100
200
1,100
230
870
350
150
40
540
250
290
1,160
Notes
Capex higher by 200 in Case B
Debtors higher by 200 in Case A
12
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Exhibit 8
Cash Flow Statement
Opening Cash
Profit after Tax
Depreciation
Cash Profit
Change in Working Capital
Change in debtors
Change in inventory
Change in creditors
Operating Cash Flow
Capex
Free Cash Flow
Change in debt
Closing Cash
True
Case
30
38
30
68
-20
-50
50
-20
48
100
-53
63
40
Year 1
Case A:
SP 1
30
188
30
218
-220
-250
50
-20
-3
100
-103
113
40
Case B:
SP 2
30
188
30
218
-20
-50
50
-20
198
300
-103
113
40
Notes
Operating Cash Flow weak in
Case A unlike in Case B …
… but higher capex in Case B …
… leading to Free Cash Flow
weak in both cases
6.2 Common accounting Sharp Practices
We list below some of the more common Sharp Practices.
6.2.1 Recording bogus revenue
This clearly is an outright fraud on all stakeholders of a company. It is invariably masterminded
by the top management of the company. The accounting entry here is –
Credit Sales A/c, Debit Debtors A/c
The impact of this is that Sales gets boosted but Operating Cash Flow (OCF) gets deflated. Given
such practices, OCF-to-PAT is becoming a key metric monitored by smart investors i.e. how much
of PAT is getting converted to Operating Cash Flow.
The classic Indian example here is that of Satyam Computer Systems (see Case Study #1 on page
20, followed by the confession letter of founder Ramalinga Raju himself.) A more recent example
is that of Manpasand Beverages (Case Study #2, page 23).
6.2.2 Shifting current expenses to a future date
We discuss below a couple of ways how this gets one.
Deflating Depreciation by changing accounting policy:
Depreciation is a non-cash charge in
the Profit & Loss Statement. The spirit of this accounting head is to provide for the renewal
and/or replacement of the Fixed Assets currently being utilized by the company. In most
cases, depreciation is equally amortized over the life of the asset, which is invariably an
estimate by the management. The following table illustrates how depreciation expenses can
be deflated and profits inflated by a mere change in policy.
December 2019
13
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Exhibit 9
How change in depreciation policy can boost profits
INR billion
Estimated life of Plant & Machinery
Salvage value at the end of asset life
Current Plant & Machinery, say
Salvage value
Net Value to be amortized over life
Annual Charge over respective life
Current Policy
10 years
5%
20
1
19
1.9
(19
10)
New Policy
15 years
10%
20
2
18
1.2
(18
15)
37%
Savings in Depreciation charge
The double-entry here is –
Credit Depreciation A/c, Debit Fixed Assets A/c
Inflating profit by capitalizing expenses:
Accounting standards offer company managements
the leeway to capitalize some operating expenses (labor cost, interest on loans, etc) in
specific situations such as projects under construction. A Sharp Practice here would be to
over-capitalize such expenses, thus inflating current profit and bloating fixed assets on the
Balance Sheet. The double-entry here is –
Credit Expense A/c, Debit Fixed Assets A/c
Likewise, some companies may capitalize R&D expenditure or heavy brand-spend on grounds
that the benefit of such expenditure will accrue for multiple years in future.
6.2.3 Recording revenue too soon
This Sharp Practice is possible in cases like construction companies, which may bill revenue before
the due share of contract is completed, or at times, before getting the customers’ approval.
6.2.4 Boosting income using one-time activities
During bad times, companies may resort to practices such as one-time sale of land or other assets.
At times, companies may even resort to sale and lease-back of their core operating assets,
optically boosting profits and return on capital.
6.2.5 Shifting current incomes to the future or future expenses to the current period
Most companies are focused on inflating current profits, and hence, this Sharp Practice is rare.
Still, some companies may prefer to smoothen their annual earnings growth by shifting some
incomes to a future period, or by creating floating provisions for expenses which may be incurred
in the next accounting period.
6.2.6 Sharp Practices during acquisitions
Many times, companies try and clean up their accumulated Sharp Practices only via acquisition
of another company. For instance, Satyam Computer attempted to acquire Maytas Infrastructure
from the promoter group to settle the inflated cash balance. Sharp Practices such as unrelated
acquisition or overvaluation of assets acquired are commonplace.
December 2019
14
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Case for a simplified Cash Flow Statement
It is easy to manipulate P&L but much more difficult to escape its aftermath in the Cash Flow
Statement. However, the current three-tiered Cash Flow Statement – Operations, Investing
and Financing – does not present investors with a clear picture of the P&L-Balance sheet
sharp practices. Hence, we propose that companies be statutorily asked to present a
simplified Cash Flow Statement along the lines shown below.
Revised Cash Flow Statement Proforma
Description
Opening Cash
Profit After Tax
Add: Depreciation & Amortization
Cash Profit
Changes in Working Capital
(Increase)/Decrease in Debtors
(Increase)/Decrease in Inventory
(Increase)/Decrease in Other Curr. Assets
Increase/(Decrease) in Creditors
Increase/(Decrease) in Other Curr. Liabs.
Inflow / (Outflow) due to Working Capital
CASH FLOW FROM OPERATIONS
Changes in Fixed Capital
(Increase)/Decrease in Fixed Assets
(Increase)/Decrease in Intangible Assets
(Acquisition) of businesses
Disposal of businesses
Inflow / (Outflow) due to Fixed Capital
FREE CASH FLOW FROM OPERATIONS
Changes in Financial Investments
(Purchase) of investments
Sale of investments
Inflow / (Outflow) due to Financial Investments
FREE CASH FLOW FOR THE YEAR
Changes in Debt
(Repayment) of debt
Fresh borrowings
Net Change in Debt
FREE CASH FLOW TO EQUITY
Less: Dividend payout
Share buyback
Closing Cash
December 2019
Formula
a
b
c
d=b+c
INR
900
500
100
600
e
f
g
h
i
j = e + f + g+ h + i
k=d+j
(60)
40
20
30
(10)
20
620
l
m
n
o
p=l+m+n+o
q=k+p
(200)
(5)
(50)
20
(235)
385
r
s
t=q+s
u
(50)
30
(20)
365
v
w
x=v+w
y=u+x
z
aa
ab = a + y + z + aa
(120)
40
(80)
285
(100)
(0)
1,085
15
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
6.2.7 Off-Balance Sheet Sharp Practices
Companies can even take some items of the Balance Sheet. For instance, companies may discount
some debtors (i.e. trade bills) with the banks. If there is recourse to them (i.e. they are still finally
liable), then such discounting gets mentioned under Contingent Liabilities, but off the Balance
Sheet. In other cases, companies may stand guarantee for loans taken by associates or other
related parties, which again will appear as Contingent Liabilities, off the Balance Sheet.
Having covered the major accounting related Sharp Practices, we can now turn to non-accounting
Sharp Practices. Unlike the former, these ones are relevant for companies in the Financials sector
as well.
6.3 Non-accounting Sharp Practices
The most common non-accounting Sharp Practices are – (1) Related party transactions, and
(2) Earnings guidance.
6.3.1 Related party transactions
Companies may have umpteen transactions with related parties, defined as subsidiaries,
associate companies and key management personnel. In cases of managements with low
integrity, this becomes a key modus operandi for misappropriation of funds. Today, annual
reports have to give complete details of all Related Party Transactions. It is a must for investors
to go through the same for vital clues related to Management Integrity.
6.3.2 Earnings guidance
Today, most companies hold conference calls with equity analysts and investors post their
quarterly results. During these conference calls, it is common for managements to guide investors
regarding their future performance in terms of revenue and earnings. Managements with low
integrity would tend to misguide investors or conceal known future disappointments.
7. Sharp Practices in Financial Sector
“If you don’t know jewelry, know the jeweler!”
The Financials sector today accounts for over 40% of India’s leading indices. Despite being one of
the largest sectors around the world, the paucity of literature written on the Sharp Practices in
the sector surprised us. For other sectors, we use cash flows as the filter to separate the wheat
from the chaff, but this filter cannot be used for Financials as we have explained earlier.
Lending organizations are leveraged entities, running anything between 5x and 10x leverage.
Hence, the smallest Sharp Practice can lead to significant erosion of net worth and consequently
shareholder value. Hence, Investors should be extra careful and vigilant when investing in Banks
and NBFCs.
We have put together a list of Sharp Practices typically used in the Financials sector. Yet, Buffett’s
words rings most true in this case, “If you don’t know jewelry, know the jeweler!”
December 2019
16
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
7.1 Upfronting income and amortizing expenses
The most common Sharp Practice in this sector is aggressive recognition of Income. This can be
in the form of:
1. High Fee Income on a loan in exchange for lower Annuity Interest Income
2. Upfront recognition of Income received on sell down of loans
3. Aggressive Third Party Product selling target
4. High Debt Syndication revenues.
Most of the above manifests in the form of above industry average Fee Income or sudden
jump/volatility in margin trajectory.
7.2 Recognition of bad assets
Pre-IBC (Insolvency and Bankruptcy Code) and AQR (Asset Quality Review), this was the trickiest
aspect of investing into the Indian Financials Sector. It was easy to evergreen, pass the loan
around and in some cases even hide the same altogether. We have seen NPAs (non-performing
assets) of banks rise exponentially post RBI audits. With IBC, system of SMA (Special Mention
Accounts) in reporting, and immediate disclosure of RBI audit results, banks now have little space
to maneuver in this area.
The other half of the Financial System in India are the HFCs and NBFCs where the RBI AQR has
not been done. We would caution investors here as this sector has the potential to throw up a
few negative surprises as we have seen with Dewan Housing Finance recently.
7.3 The issue of “large”
Granularity is the key to mitigate risks in lending. The biggest errors are made in “large” sizes. A
few illustrations below.
7.3.1 Large ticket size
Large ticket size loans increase the lumpiness of stress for lenders and makes it difficult to
navigate during tough times. The classic case being the power crisis we saw in the early part of
the decade. Low demand and lack of consistent fuel availability led to a significant crisis for the
lenders. The very same sector had propelled the loan books of banks over 2005-10.
7.3.2 Large collateral
This is the biggest folly in collateralized lending. In collateralized lending, liquidity is as important
as the size and value of collateral. Larger the size of collateral, lesser the liquidity and hence lower
the worth. The classic case being Loan Against Shares – a 20% stake of promoter with LTV (loan-
to-value) of 50% maybe a tougher collateral to liquidate than a 0.1% stake in the same company
of a retail investor with even higher LTVs.
7.3.3 Large loan book
Did you know that there was not a single NBFC rated below AA whose loan book was higher than
INR 300 billion until Sep 2018? Size begets rating and rating begets more funding which in turn
leads to bigger size. As this “virtuous” cycle plays, the motive of getting
“larger”
is clear.
December 2019
17
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
7.4 Trade checks & sample study
There are shenanigans in every sector and most of them are perennial borrowers. These
person(s) are mostly blacklisted in the trade that they are in but have the favor of some lender.
A quick check with the industry participants can give a good sense of the quality of the borrower
and in turn the processes of the lender.
In case of retail lending firms, one effective way is to do a sample study. If an HFC claims to have
a retail loan book of INR 1 trillion, it implies a market share of ~5%. A sample of 500-1,000
respondents should give you a quick check on the veracity of the claim of granularity.
7.5 Organization structure
The first thing to look for in the organization structures of lending institutes is segregation of
Credit Appraisal and Business. The credit team is the most effective internal auditor that a bank
has, and if its incentives are linked to the business of the firm, it is a recipe for disaster. They are
the brakes of a car and imagine a situation where the brakes don’t work on speeds above danger
limits. During periods of slow growth, we don’t need brakes!
The second aspect to look for is the subtle difference between retail and wholesale lending
structures. With the advent of credit score and big data analytics, the function of collections can
get undermined. We believe that in retail lending, getting collections right is more important than
credit and lending. On the other hand, in wholesale credit, appraisal takes center-stage. This
subtle difference should be investigated before investing in any lending organization.
8. Other checks on Management Integrity
Auditors’ report, top management changes, pledged shares, 360
o
feedback
Besides keeping an eye on the management’s Sharp Practices, investors would do well to keep a
tab on auditors’ report, top management changes, promoters’ pledged shares, and also take a
360-degree feedback on Management Integrity.
8.1 Auditors’ report
As things stand, currently in India, auditors are expected to give a report on the state of a
company’s financials not only at the end of the year, but also a limited review report at the end
of every quarter. Investors should closely monitor the remarks made therein for any evidence of
Sharp Practices.
8.2 Top management changes
Frequent changes in the top management – especially CEO, CFO and Company Secretary – are
signals of some form of trouble brewing in the company. Likewise, nowadays, resignation of
statutory auditors is almost a certain sign of financial irregularities.
8.3 Promoters’ pledged shares
Shares pledged by promoters has emerged as a serious concern to the holdings of minority
shareholders. In many cases, promoters pledge their shares with banks or NBFCs to raise funds
to pursue their personal business ambitions. If that project fails, the lending institution begins to
December 2019
18
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
offload the shares pledged with it. This creates a domino effect, taking down share value for all
shareholders.
8.4 360-degree feedback
As is said, “You can fool some people all the time, and all people for some time. But you cannot
fool all people all the time.” Given this, a 360-degree feedback on Management Integrity must
become an unavoidable part of an investor’s to-do list prior to investing in a company. Such a
360-degree list of constituents would include (wherever and as many as possible) –
Non-executive members of the Board of Directors
Employees – current and/or ex
Customers
Distributors / Dealers
Suppliers and
Competitors.
The purpose of the whole exercise detailed above – right from looking out for various Sharp
Practices to the 360-degree feedback – is to arrive at what author Michael Shern in his book,
“The
Investment Checklist”
calls, the
moment of integrity
i.e. that final piece of clinching evidence
as to whether the management is honest in its dealings with stakeholders or not.
9.
Conclusions
Invest only if you arrive at that Moment of Integrity
In equity investing, management is 90%, industry 9% and 1% everything else. Hence, getting
Management Integrity right is the critical first step.
There’s only one way of writing honest accounts, and infinite ways of manipulating them. The
first hint of compromised Management Integrity can be found in the published financial
statements of companies.
Most Sharp Practices are to inflate profits and stuff the “financial trash” in the Balance Sheet
(Credit P&L, Debit Balance Sheet). Hence, it is very important to juxtapose a company’s Cash
Flow Statement along with its Profit & Loss Statement.
Profit & Loss statement is easier to manipulate; hence, managements must be statutorily
asked to present a simplified Free Cash Flow statement. Our suggested proforma on page 15
is a good starting template which can be improved upon further.
Auditors must be made more accountable to minority shareholders to avoid Sharp Practices
by the management.
As an investor, have a forensic mindset to get management’s explanation for all the perceived
Sharp Practices.
Finally, interact with various stakeholders – customers, employees, suppliers, competitors,
etc – till you arrive at that moment of Management Integrity.
19
December 2019
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
ANNEXURE: Sharp Practices – a few India case studies in brief
There are several cases of Sharp Practices in the Indian corporate sector. This has increased even
more significantly in recent times, with many promoters either going fugitive or getting arrested
on grounds of fraud. We present below just a few such cases for some insights into the modus
operandi, and based on the same, what kind of stocks investors may avoid.
Sharp Practices Case Study #1
Satyam Computer Services
Satyam Computer’s case study arguably takes the dubious distinction of the mother of all
corporate frauds in India. Post settling of the fraud, the company was acquired by Tech Mahindra.
Company & Promoter background
Satyam was incorporated by Ramalinga Raju in 1987, and made its IPO in 1991, which was
subscribed over 17 times.
It was a fast-growing IT software company with peers such as Infosys, TCS and Wipro.
The Sharp Practice modus operandi
The key behind Satyam’s fraud appears to be its promoter’s keen interest in real estate.
Ramalinga Raju even inflated the payroll and embezzled money out of the company by way
of salaries to fictitious employees.
All the while, he also inflated the company’s cash balances which were visible in the system.
By 2008, the “cash balance” had ballooned to over a billion US dollars.
That’s when Raju sought to merge the group’s real estate business into the company, so that
there may be real assets created against the fictitious cash.
However, that deal did not go through, forcing Raju to do the confession (for full letter, see
page 21).
The red flags & the bust
The fraud was so well managed (most likely in collusion with internal and statutory auditors)
that there was hardly any trail of evidence.
In hindsight, the only weak case was the company’s Other income, which was very low
compared to its cash balance.
Exhibit 10
Satyam Computer – Key financials
INR billion
Sales
PAT
Net Worth
Debtors
Cash balance
FY05
35
7
33
8
24
FY06
48
11
43
12
31
FY07
65
14
57
17
40
FY08
85
17
72
24
45
FY09
88
-82
-9
16
5
Remarks
Write-offs deflate PAT
Net worth also eroded
Cash balance restored
December 2019
20
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Exhibit 11
Satyam Computer – Stock Price tumbled post the fraud expose
800
Satyam Computer Price Performance (INR)
600
400
200
Satyam Stock Price
0
Sensex - Rebased
Sharp Practices Case Study #1 Annexure
Satyam Computer founder Ramalinga Raju’s confession letter
7 January 2009
To the Board of Directors
Satyam Computer Services Ltd
Dear Board Members,
It is with deep regret, at tremendous burden that I am carrying on my conscience that I would
like to bring the following facts to your notice:
The Balance Sheet carries as of September 30, 2008 –
Inflated (non-existent) cash and bank balances of Rs 5,040 crore (as against Rs 5,361 crore
reflected in the books)
An accrued interest of Rs 376 crore which is non-existent
An understated liability of Rs 1,230 crore on account of funds arranged by me
An overstated debtors position of Rs 490 crore (as against Rs 2,651 crore reflected in the
books).
For the September quarter (02) we reported a revenue of Rs 2,700 crore and an operating margin
of Rs 649 crore (24% of revenues) as against the actual revenues of Rs 2,112 crore and an actual
operating margin of Rs 61 crore (3% of revenues). This has resulted in artificial cash and bank
balances going up by Rs 588 crore in Q2 alone.
The gap in the Balance Sheet has arisen purely on account of inflated profits over a period of last
several years (limited only to Satyam standalone, books of subsidiaries reflecting true
performance). What started as a marginal gap between actual operating profit and the one
reflected in the books of accounts continued to grow over the years. It has attained
unmanageable proportions as the size of company operations grew significantly (annualized
revenue run rate of Rs 11,276 crore in the September quarter, 2008 and official reserves of
Rs 8,392 crore). The differential in the real profits and the one reflected in the books was further
December 2019
21
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
accentuated by the fact that the company had to carry additional resources and assets to justify
higher level of operations — thereby significantly increasing the costs.
Every attempt made to eliminate the gap failed. As the promoters held a small percentage of
equity, the concern was that poor performance would result in a takeover; thereby exposing the
gap. It was like riding a tiger, not knowing how to get off without being eaten.
The aborted Maytas acquisition deal was the last attempt to fill the fictitious assets with real
ones. Maytas’ investors were convinced that this is a good divestment opportunity and a strategic
fit. Once Satyam’s problem was solved, it was hoped that Maytas’ payments can be delayed. But
that was not to be. What followed in the last several days is common knowledge.
I would like the Board to know:
1. That neither myself, nor the Managing Director (including our spouses) sold any shares in the
last eight years — excepting for a small proportion declared and sold for philanthropic purposes.
2. That in the last two years a net amount of Rs 1,230 crore was arranged to Satyam (not reflected
in the books of Satyam) to keep the operations going by resorting to pledging all the promoter
shares and raising funds from known sources by giving all kinds of assurances (statement
enclosed, only to the members of the board). Significant dividend payments, acquisitions, capital
expenditure to provide for growth did not help matters. Every attempt was made to keep the
wheel moving and to ensure prompt payment of salaries to the associates. The last straw was the
selling of most of the pledged shares by the lenders on account of margin triggers.
3. That neither me, nor the Managing Director, took even one rupee/dollar from the company
and have not benefitted in financial terms on account of the inflated results.
4. None of the board members, past or present, had any knowledge of the situation in which the
company is placed. Even business leaders and senior executives in the company, such as, Ram
Mynampati, Subu D, T.R. Anand, Keshab Panda, Virender Agarwal, A.S. Murthy, Han T, S.V.
Krishnan, Vijay Prasad, Manish Mehta, Murali V. Sriram Papani, Kavale, Joe Lagioia, Ravindra
Penumetsa, Jayaraman and Prabhakar Gupta are unaware of the real situation as against the
books of accounts. None of my or Managing Director’s immediate or extended family members
has any idea about these issues.
Having put these facts before you, I leave it to the wisdom of the board to take the matters
forward. However, I am also taking the liberty to recommend the following steps:
1. A Task Force has been formed in the last few days to address the situation arising out of the
failed Maytas acquisition attempt. This consists of some of the most accomplished leaders of
Satyam: Subu D, T.R. Anand, Keshab Panda and Virender Agarwal, representing business
functions, and A.S. Murthy, Han T and Murali V representing support functions. I suggest that
Ram Mynampati be made the Chairman of this Task Force to immediately address some of the
operational matters on hand. Ram can also act as an interim CEO reporting to the board.
December 2019
22
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
2. Merrill Lynch can be entrusted with the task of quickly exploring some merger opportunities.
3. You may have a statement of accounts prepared by the auditors in light of the facts that I have
placed before you.
I have promoted and have been associated with Satyam for well over 20 years now. I have seen
it grow from few people to 53,000 people, with 185 Fortune 500 companies as customers and
operations in 66 countries. Satyam has established an excellent leadership and competency base
at all levels. I sincerely apologize to all Satyamites and stakeholders, who have made Satyam a
special organization, for the current situation. I am confident they will stand by the company in
this hour of crisis.
In light of the above, I fervently appeal to the Board to hold together to take some important
steps. Mr T R Prasad is well placed to mobilize support from the government at this crucial time.
With the hope that members of the Task Force aid the financial advisor, Merrill Lynch (now Bank
of America) will stand by the company at this crucial hour, I am marking copies of this statement
to them as well.
Under the circumstances, I am tendering my resignation as the chairman of Satyam and shall
continue in this position only till such time the current Board is expanded. My continuance is just
to ensure enhancement of the Board over the next several days or as early as possible.
I am now prepared to subject myself to the laws of the land and face consequences thereof.
B. Ramalinga Raju
Copies marked to:
1. Chairman SEBI
2. Stock Exchanges
Sharp Practices Case Study #2
Manpasand Beverages
Company & Promoter background
Manpasand Beverages is a fruit drink manufacturing company engaged in processing,
manufacturing and marketing of juice from fruit pulp. It offers its products under the brand
names Mango Sip, Apple Sip, Guava Sip and Litchi Sip.
The company was founded in 1997 and is based in Vadodara, Gujarat
Mr Dhirendra Hansraj Singh is the Chairman and Managing Director and holds a Bachelor's
Degree in Arts from Gorakhpur Vishwavidyalaya, Varanasi.
The Sharp Practice modus operandi
The company is alleged to have overstated its revenues and profits.
[1]
December 2019
23
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
The company set up 30 fake units across the country. Purchase and sale transactions were
then shown with values inflating with each transaction in order to claim a cumulatively large
sum of input credit.
[2]
These inter-unit transactions were worth over INR 3 billion and their input tax credit would
come up to INR 0.4 billion.
[2]
The red flags & the bust
Incongruence in market share data, too-good-to-be-true growth and industry-leading
margins were the red flags prior to the auditors resigning in May 2018.
In FY19, the company wrote down its sales and receivables by issuing a credit note of INR 1.8
billion, and providing for a credit loss of INR 1.2 billion on its receivables.
To divert funds, capital work in progress and capital advances seem to be inflated as well.
An amount of INR 2.7 billion has been provisioned for losses in FY19.
The promoters were jailed for GST fraud in May 2019. The company has deposited INR 178
million with the GST authorities under protest to secure their release.
Sources:
[1] – Business Today, 9-Oct-19 – “Is Manpasand Beverages among the biggest corporate frauds in India?”
[2] – Money Control, 31-May-19 – “How a Rs 40-crore GST fraud unfolded at Manpasand Beverages”
Exhibit 12
Manpasand Beverages – Key Financials
INR million
Net Sales
Exceptional write-offs
Reported Net Profit
Capital Work-in-Progress
Debtors
FY15
3,598
0
300
1,316
593
FY16
5,211
0
505
1,369
678
FY17
7,015
0
726
1,900
752
FY18
9,485
0
1,000
3,478
1,393
FY19
6,361
-3,869
-5,916
344
574
Exhibit 13
Manpasand Beverages – Stock performance
May-18 - Deloitte
resigns as auditor
500
400
300
200
Manpasand Beverages Stock Price (INR)
100
May-19 - GST dept
arrests promoters
for fraud
Manpasand Stock Price
0
Sensex - Rebased
December 2019
24
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Sharp Practices Case Study #3
Educomp
Company & Promoter background
Incorporated in 1994, Educomp was founded by Mr Shantanu Prakash.
The company went public in 2006 and by 2011, it was one of the best emerging companies
to come out of India. Multiple awards were bestowed upon both the founder and the
company.
The vision of the company to upgrade the education standard of schools through the digital
medium was laudable.
The Sharp Practice modus operandi
The company sold equipment to schools which was financed by Educomp and recognized it
as revenues.
The schools were unable to repay the loans and the assets (mostly computers) had lost
significant value leading to little recovery.
The intent here may not have been malafide but it was a case of providing funding to a weak
set of clientele on basis of poor collateral.
Educomp used a subsidiary, discounted its receivables, and stood guarantee for the same.
This helped it manage debt levels by moving it off the Balance Sheet (in this case, Contingent
Liability). The guarantee was with recourse and should have been deemed as leverage.
The red flags & the bust
Aggressive Accounting with respect to booking revenues upfront for asset sale. This led to
creation of assets through borrowings and the same was booked as revenues and profit.
Continuous negative cash flows meant that the pace of asset sale was much faster than the
revenues coming in.
In FY13, the company went into debt re-structuring and by FY17, the company’s net worth
was negative.
Noteworthy to mention here is a recent quote from the founder, Mr Shantanu - “There is no
appreciation that businesses can fail. We failed as a business. Our model was wrong. It did
not work.”
Exhibit 14
Educomp – Key financials
INR billion
Revenues
PAT
OCF
Free Cash Flow
Contingent Liability
2009
6.4
1.3
1.6
(4.2)
1.7
2010
10.4
2.8
1.8
(5.1)
2.3
2011
13.5
3.4
1.9
(6. 3)
8.9
2012
14.9
1.4
(0.7)
(4.4)
12
2013 Notes
12.1 Computers sold to schools
(1.3) on loan booked as revenue
(4.8)
OCF turned negative
(6.0)
Constant negative free cash
16 Used a subsidiary,
discounted its receivables
and stood guarantee
December 2019
25
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Exhibit 15
Educomp – Stock price performance
1000
Educomp Price Performance (INR)
800
600
400
Educomp Stock Price
Sensex - Rebased
200
0
Sharp Practices Case Study #4
Gitanjali Gems
Company & Promoter background
Established in 1966, Gitanjali’s activities were spread across the entire value chain from rough
diamond sourcing, cutting, polishing and distribution, jewelry manufacturing to branding and
retailing gold and diamond jewelry in India and abroad.
It was one of the first to launch branded daily-wear jewelry in 1994 by the brand name ‘Gili’.
At one point, it owned eight out of the top 10 jewelry brands in the country
The promoter is Mr Mehul Choksi, currently a fugitive residing in Anitgua.
The Sharp Practice modus operandi
High Receivable days of at least 150 days and going up to 300+ days in the period FY08-14.
Inventory buildup was also significant which eventually saw significant write down in 2014.
Promoter pledge and share price – In July 2013, SEBI barred the promoter of the company
Mr Mehul Choksi and 26 other entities from trading in the market for a period of 6 months.
It is believed that the promoter along with these entities was indulging in market
manipulation of company's shares. This led to a huge correction in stock price.
The red flags & the bust
Tax rates and dividend payouts were mostly in single digit.
Operating Cash Flow conversion was consistently low.
Sales to related parties were in the range of 15-22% of total sales.
December 2019
26
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Exhibit 16
Gitanjali Gems:
Key financials
INR billion
Sales
EBITDA
PAT
Tax Rate
Inventory
Trade receivables
Debt
Operating Cash Flow
2010
65.3
4.8
2.0
10%
20.8
32.3
26.0
-0.2
2011
93.8
5.9
3.6
7%
29.0
40.2
31.3
3.1
2012
125.0
8.8
4.9
7%
36.9
53.8
39.4
-0.1
2013
164.2
11.9
5.9
4%
43.5
71.9
52.4
-4.9
2014
124.4
8.6
0.3
1%
35.0
94.8
84.8
-36.9
Notes
Anemic Tax Rate
Inventory write down
Almost always negative
Exhibit 17
Gitanjali Gems – Stock price performance
800
Gitanjali Gems Price Performance (INR)
600
400
200
Gitanjali Stock Price
Sensex - Rebased
0
December 2019
27
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
2014-19 Wealth
Creation Study:
Detailed findings
December 2019
28
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
#1
Trend in Wealth Creation
INR 49 trillion Wealth Created during 2014-19
Over the 5-year period 2014-19 (ended March), the top 100 Wealth Creating companies
created wealth of INR 49 trillion. This is the highest ever in any 5-year span in the past.
The pace of Wealth Creation is also robust at 22% CAGR vis-à-vis 12% for the BSE Sensex.
As the later sections suggest, valuation re-rating has played a major role in Wealth Creation.
Exhibit 1
2014-19 Wealth Created at INR 49 trillion is the highest ever
Wealth Created Trend
(INR
trillion)
Wealth Created
(INR
trillion)
49.0
44.9
38.9
34.2
25.4
14.3
16.3
9.7
26.5
22.1
29.4
18.4
28.4
16.2
Exhibit 2
2014-19 pace of Wealth Creation is healthy at 22% CAGR vis-à-vis benchmark’s 12% CAGR
(30%)
(26%)
40%
36%
(39%)
49%
(18%)
33%
(6%)
(12%)
19%
17%
(4%)
17%
(Figures in brackets is Sensex CAGR)
Wealth
Pace of Wealth Creation
Created CAGR (%)
(12%)
19%
(22%)
26%
(10%)
(12%)
(11%)
(12%)
25%
(5%)
23% 22%
22%
18%
Key Takeaway
Forget markets, think stocks
For the past 5 successive study periods, market benchmark indices have delivered returns
ranging from 5% to 12%. Despite this, the top Wealth Creators created wealth at a robust pace
of 18-25%. This reinforces our pet take on market timing, “Forget markets, think stocks.”
December 2019
29
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
#2
The Biggest Wealth Creators
Reliance Industries smashes all records as the Biggest Wealth Creator
After a gap of 7 years,
Reliance Industries
has once again emerged the biggest Wealth
Creator over 2014-19. As Exhibit 4 suggests, the INR 5.6 trillion wealth created by Reliance is
the highest ever so far by a huge margin.
Exhibit 3 indicates that Reliance’s P/E re-rating from 15x in 2014 to 22x in 2019 is a key driver
behind the 24% stock return CAGR. Its PAT CAGR along the while was only 14%.
Five of the top 10 biggest Wealth Creators are from the Financials sector.
Exhibit 3
Top 10 Biggest Wealth Creators (2014-19)
Rank Company
1 Reliance Inds
2 HDFC Bank
3 TCS
4 Hind. Unilever
5 HDFC
6 Kotak Mahindra
7 Bajaj Finance
8 Infosys
9 Maruti Suzuki
10 Axis Bank
Total of Top 10
Total of Top 100
Wealth Created
INR bn % share
5,636
11.5
4,085
8.3
3,655
7.5
2,391
4.9
1,800
3.7
1,795
3.7
1,594
3.3
1,497
3.1
1,420
2.9
1,209
2.5
25,081
51
49,048
100
CAGR (%)
Price
PAT
24
14
25
21
13
11
23
12
17
15
28
24
76
41
13
7
28
19
22
-4
22
13
23
15
P/E (x)
2019 2014
22
15
28
21
24
22
60
36
21
17
35
24
44
12
21
18
34
24
40
11
27
19
25
18
RoE (%)
2019 2014
10
10
15
20
35
39
79
102
15
21
12
13
20
18
23
24
13
12
7
16
15
18
15
16
Exhibit 4
Reliance Industries back with a bang!
Biggest Wealth Creators over the years
(Wealth Created in INR billion)
Reliance Industries (5)
TCS (5)
Reliance
Industries
5,636
HDFC
Bank
ONGC (3)
Hindustan
Unilever (4)
Wipro
Wipro (2)
ITC
HUL
Key Takeaway
Value Migration at play again?
Value Migration (VM) means that value (i.e. profit/market cap) moves from outmoded business
models to superior ones. The previous 6 biggest Wealth Creators were VM beneficiaries – TCS
(value migrating “from Boston to Bengaluru”) and HDFC (from PSU banks to private). Reliance’s
resurgence too may be partly attributed to Value Migration – expected value unlocking in
Reliance Retail (VM from mom-n-pop stores) and Reliance Jio (VM from voice to data).
December 2019
30
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
#3
The Fastest Wealth Creators
Indiabulls Ventures is the Fastest Wealth Creator for the second consecutive year
For the second study in a row,
Indiabulls Ventures
has emerged as the Fastest Wealth
Creator, with 2014-19 stock price multiplier of 18x (78% CAGR).
Indiabulls’ PAT CAGR is a healthy 35%, amplified by a 10x rise in P/E (58% CAGR).
Bajaj Finance
is the only company with a unique distinction of being in the top 10 list of both,
biggest and fastest.
Six of the top 10 Fastest Wealth Creators had single-digit P/E multiple in base year 2014, and
7 had market cap below INR 30 billion.
INR 1 million invested equally among the top 10 fastest Wealth Creators in 2014 would have
grown to INR 11 million in 2019; return CAGR of 61% v/s barely 12% for the Sensex.
Exhibit 5
Top 10 Fastest Wealth Creators (2014-19)
Rank Company
1
2
3
4
5
6
7
8
9
10
Indiabulls Ventures
Bajaj Finance
Bombay Burmah
Aarti Industries
Sundram Fasteners
Bajaj Finserv
Atul
Rajesh Exports
Honeywell Auto
Britannia Industries
Price Appn.
(x)
18
17
13
13
9
9
8
7
7
7
CAGR (%)
Price
PAT
78
76
68
67
55
55
52
49
49
49
35
41
36
26
31
16
14
29
33
25
Mkt Cap (INR bn)
2019
2014
197
1,748
91
136
119
1,120
106
197
197
741
4
90
7
11
13
126
13
26
27
101
P/E (x)
2019
2014
43
44
10
28
26
35
25
15
55
64
4
12
4
7
11
8
6
7
31
26
Exhibit 6
History of Fastest Wealth Creators
5-yr Price 5-yr Price
Year Company
Multiple (x) CAGR %
1996 Dr Reddy's Labs
30
97
1997 Cipla
7
48
1998 Satyam Computers
23
87
1999 Satyam Computers
75
137
2000 SSI
223
195
2001 Infosys
66
131
2002 Wipro
69
133
2003 e-Serve
50
119
2004 Matrix Labs
75
137
2005 Matrix Labs
136
167
2006 Matrix Labs
182
183
2007 B F Utilities
665
267
Year
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
5-yr Price 5-yr Price
Company
Multiple (x) CAGR %
Unitech
837
284
Unitech
54
122
Unitech
28
95
Sanwaria Agro
50
119
TTK Prestige
24
89
TTK Prestige
28
95
Eicher Motors
27
94
Ajanta Pharma
50
119
Ajanta Pharma
53
121
Ajanta Pharma
29
96
Indiabulls Ventures
30
97
Indiabulls Ventures
18
78
Key Takeaway
High-quality midcaps at reasonable valuations are potential multibaggers
Of the top 10 Fastest Wealth Creators, 8 were trading at a P/E of less than 12x in 2014. Of these,
6 had a market cap of less than INR 30 billion. High-quality midcaps run by high-quality
managements bought at reasonable price are potential multi-baggers. Having said that,
mortality of midcaps is also fairly high. The main factor to ensure here is Integrity of
Management, the theme of this year’s study.
December 2019
31
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
#4
The Most Consistent Wealth Creators
IndusInd Bank is the Most Consistent Wealth Creator
IndusInd Bank
has emerged the Most Consistent Wealth Creator by virtue of –
3. Appearing among top 100 Wealth Creators in each of the last 10 studies; and
4. Recording the highest Price CAGR of 49% over the 10-year period 2009 to 2019.
Study after study has confirmed that consumer-facing businesses are less vulnerable to
business cycles, and hence offer steady long-term return.
Exhibit 7
Top 10 Most Consistent Wealth Creators (2009-19)
Rank
1
2
3
4
5
6
7
8
9
10
Company
IndusInd Bank
Pidilite Industries
Titan Company
Shree Cement
Asian Paints
Kotak Mahindra
Godrej Consumer
TCS
HDFC Bank
LIC Housing
Appeared in 10-yr Price 10-yr PAT
WC Study (x) CAGR (%) CAGR (%)
10
49
35
10
40
24
10
40
23
10
39
7
10
34
18
10
34
27
10
32
29
10
31
20
10
28
26
10
28
16
P/E (x)
2019 2009
33
7
67
19
72
20
57
4
67
19
35
15
33
20
24
10
28
18
11
4
RoE (%)
2019 2009
13
12
23
16
23
31
12
49
23
33
12
10
29
30
35
33
15
15
15
24
Exhibit 8
Consumer-facing companies more likely to be Consistent Wealth Creators
Consistent Wealth Creators based on last 5 Studies
Consumer-facing
Non Consumer-facing
Consumer & Healthcare
Asian Paints (5)
ITC (1)
Nestle (2)
Sun Pharma (3)
Dabur (4)
Titan (5)
Auto
Pidilite (2)
Marico (1)
Godrej
Cons. (2)
M & M (1)
Maruti Suzuki
(1)
Financials
Kotak Mah. (5)
HDFC Bank (4)
Axis Bank (3)
IndusInd Bk (1)
LIC Housing (1)
Bosch (3)
Cummins (3)
Shree Cem. (2)
TCS (1)
NOTE:
Bracket indicates number of times appeared within top 10 in last 5 Wealth Creation Studies
Key Takeaway
“Be greedy when others are fearful and fearful when others are greedy.”
These words of Warren Buffet were true in 2009 when post the global financial crisis, bluest of
blue chip stocks were available at reasonable valuations (trailing 12-month P/E of less than 20x).
All such stocks delivered handsome returns over the next 10 years. However, as things stand,
the quality of the same stocks remains pristine. However, all investors are greedy to own these
very stocks, driving up valuations. It may well be time to be fearful in some of them.
December 2019
32
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
#5
Wealth Creators Index (Wealthex) v/s BSE Sensex
Superior earnings and price performance over benchmark
We compare Wealthex (top 100 Wealth Creators Market Cap index) with the BSE Sensex on 3
parameters - (1) market performance, (2) earnings growth and (3) valuation.
Market performance:
Over 2014-19, Wealth Creating companies have delivered return CAGR
of 23% v/s 12% for the BSE Sensex. March 2019 over March 2014, Wealthex is up 177%
whereas the Sensex is up 73% i.e. 104% outperformance over 5 years.
Earnings growth:
Wealthex clocked 5-year earnings CAGR of 14% v/s 2% for BSE Sensex.
Further, YoY earnings growth for Wealthex is higher in 4 of the 5 years 2014 through 2019.
Valuation:
Valuation re-rating has contributed 8% to Sensex CAGR of 12%. In contrast, much
of Wealthex’s 23% CAGR is led by the 14% earnings CAGR.
Exhibit 9
Wealthex v/s Sensex: Superior market performance on the back of higher earnings growth
Mar-14
BSE Sensex
YoY (%)
Wealthex - based to Sensex
YoY (%)
Sensex EPS (INR)
YoY (%)
Wealthex EPS (INR)
YoY (%)
Sensex PE (x)
Wealthex PE (x)
22,386
22,386
1,334
1,042
17
17
Mar-15
27,957
25
32,455
45
1,348
1
1,333
15
21
22
Mar-16
25,342
(9)
33,636
4
1,330
(1)
1,372
21
19
19
Mar-17
29,621
17
42,747
27
1,345
1
1,628
15
22
21
Mar-18
32,969
11
52,094
22
1,361
1
2,093
10
24
23
Mar-19
5 Year
CAGR (%)
12
38,673
17
23
62,016
19
2
1,482
9
2,494
14
8
26
9
8
25
Exhibit 10
Wealthex invariably outperforms benchmark indices handsomely
300
Wealthex - Rebased
250
200
150
100
50
Sensex - Rebased
104%
Outperformance
Key Takeaway
Is the Active versus Passive debate settled in India at least?
Globally, it’s almost settled that active fund managers are unable to outperform the benchmark
indices after accounting for their management fee. This has led to a surge in passive funds which
simply mimic the benchmark. However, this scenario seems far-fetched in the Indian context
where a fairly large number of stocks handsomely outperform the benchmarks.
December 2019
33
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
#6
Wealth Creation: Sector analysis
Financials is the biggest Wealth Creating sector for the third consecutive year
Financials
has emerged as India’s biggest Wealth Creating sector over 2014-19 for the third
consecutive year. The surge in Wealth Creation in the sector has been led by private banks
and NBFCs.
In terms of share of Wealth Created,
IT
is the biggest loser over the last 5 years, and
Oil &
Gas
is the biggest gainer.
Wealth Creation during 2014-19 was highly concentrated
– top 5 sectors accounted for a
high 85% of total Wealth Created.
Exhibit 11
Financials is the top Wealth Creating sector
Sector
(No of companies)
Financials (23)
Consumer/Retail (21)
Oil & Gas (6)
Technology (5)
Auto (12)
Healthcare (6)
Metals / Mining (2)
Cement (3)
Capital Goods (4)
Utilities (1)
Telecom (1)
Others (16)
Total
WC Share of WC %
(INR bn) 2019
2014
15,899 32
19
8,813 18
20
7,800 16
1
5,715 12
24
3,216
7
11
1,607
3
9
1,083
2
2
1,074
2
4
850
2
4
487
1
-
88
0
2
2,417
5
2
49,048 100
100
CAGR 14-19 (%)
Price
PAT
27
12
25
15
23
18
12
10
26
23
29
22
19
19
18
6
31
16
14
22
15 P to L
28
20
23
15
P/E (x)
2019
2014
28
15
53
36
16
13
22
20
28
25
31
23
12
12
48
29
31
17
8
12
–
112
30
22
25
18
RoE (%)
2019
2014
12
17
29
33
13
11
29
30
15
13
12
12
22
11
9
12
18
15
21
13
–
10
15
14
15
16
Exhibit 12
Financials sector significantly beats its own previous high of Wealth Creation
Top Wealth Creating Sector trend (INR bn)
11,905
5,826
1,839 2,723
7,103 7,586 6,364
3,672 4,456
9,346
15,899
3,891
4,949 5,194
2,126
Oil
Oil
Oil
Oil
Oil Metals/ Finan- Finan- Cons- Tech. Cons- Cons- Finan- Finan- Finan-
& Gas & Gas & Gas & Gas & Gas Mining cials cials umer/
umer/ umer/ cials cials cials
Retail
Retail Retail
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
Key Takeaway
Sustaining its No.1 position will be a challenge for the Financials sector
In FY20, the Financials sector has been witness to a major crisis, triggered by the default of
IL&FS. Several leading banks and NBFCs have seen a sharp rise in non-performing assets and
provisions for the same. Overall, with the Indian economy too in a tailspin, the Financials sector
will find it challenging to lead Wealth Creation during the next study period i.e. FY15-20.
December 2019
34
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
#7
Wealth Creation: Ownership – Private v/s PSU
PSUs remain insignificant in Wealth Creation; privatization a great idea
PSUs’ (public sector undertakings) Wealth Creation performance during 2014-19 was weak:
– The number of PSUs in the top 100 Wealth Creators is only 9.
– Wealth Created by these 9 PSUs is just 6% of total.
The 9 Wealth Creating PSUs are
IOC, BPCL, HPCL, Power Grid Corporation, Petronet LNG,
Indraprastha Gas, LIC Housing, Bharat Electronics,
and
NBCC.
The only positive is that Wealth-Creating PSUs’ 2014-19 PAT CAGR at 22% is higher than
private sector’s 13%. This has led to PSUs’ price CAGR of 20% almost matching that of the
private sector.
Exhibit 13
PSUs remain insignificant in Wealth Creation
49
51
36
30
35
25
18
25
27
16
No. of PSUs
% Wealth Created
28
26
30
22
27
24
20
20
11
9
5
2
5
2
7
4
9
10
11
9
9
6
Exhibit 14
PSUs, as a whole, have seen a valuation
Exhibit 15
PSUs which are virtual monopolies are
de-rating despite healthy PAT CAGR and rise in RoE
2014-2019
PSU
Private
9
91
6
94
3
12
22
13
20
23
11
19
10
28
12
17
18
15
creating wealth e.g. oil marketers, Power Grid
Utilities
16%
Capital Goods
5%
Financials
5%
Oil & Gas
71%
No. of Wealth Creators in Top 100
Share of Wealth Created (%)
5-year Sales CAGR (%)
5-year PAT CAGR (%)
5-year Price CAGR (%)
P/E - 2014 (x)
P/E - 2019 (x)
RoE - 2014 (%)
RoE - 2019 (%)
Others
3%
Key Takeaway
Privatization is the only solution
It’s more than evident that the bureaucratic culture and lack of entrepreneurship in PSUs
prevent them from effectively competing with their private sector counterparts. We believe the
government must persist with its mantra of “Minimum government, maximum governance”,
including an active plan to privatize non-core PSUs. This will serve the dual purpose of -
(1) Revitalizing the PSUs, and
(2) Raising much needed revenue for the government.
December 2019
35
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
The rise and rise of the Indian entrepreneur
We observed India’s market cap distribution over the last 20 years into 3 categories – PSUs,
MNCs and private entrepreneurs.
As Exhibit 16 shows, there is a clear and continuous migration of value from PSUs and MNCs
to private entrepreneurs.
PSUs’ share of market cap is down from 21% in 1999 to 14% currently. Likewise, share of
MNCs is down from 32% to 14%. Both their losses have been the gain of the Indian private
entrepreneur, with market cap share rising from 47% in 1999 to 73% currently.
Expect the above trend to continue as –
1. MNCs increasingly prefer the unlisted route to expand their presence in India and
2. PSUs continue to see their competitive advantage eroding.
Exhibit 16
Indian private entrepreneurs are gaining significant share of India’s market cap
India Inc - Market Cap Distribution
Private
MNC
PSU
December 2019
36
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
#8
Wealth Creation: Market Cap Rank Analysis
In our 2015 Wealth Creation Study, we called large, mid and small cap stocks as
Mega, Mid
and
Mini,
defined as under:
Mega –
Top 100 stocks by market cap rank for any given year
Mid
–
Next 200 stocks by market cap rank
Mini –
All stocks below the top 300 ranks.
Market cap ranks of companies change constantly. Over time, companies also cross over from
one category to another. For the period 2014-19, the market cap ranks crossover matrix stands
as under –
Exhibit 17
2014-19: Market cap rank crossovers: Number of companies and average returns
FROM (in 2014)
Mini
Mid
Mega
TO (in 2019)
Mega
Avg Return
0
—
14
34%
75
12%
Mid
Avg Return
42
43%
103
18%
22
1%
Mini
Avg Return
Merged / De-listed
TOTAL
2,481
11%
636
3,159
79
-11%
4
200
3
-20%
0
100
How to read the table
In 2014, there were 3,159 Mini companies (i.e. ranked beyond 300). Of these, none moved
to the Mega category by 2019. 42 Minis moved to Mid category by 2019, delivering an
average 5-year return CAGR of 43% in the process. Next, 2,481 Mini companies stayed as
Mini and delivered average 11% return CAGR. (636 companies got merged or de-listed.)
Of the 200 Mid companies in 2014, 14 moved to Mega by 2019, delivering an average 34%
return CAGR in the process. 103 Mid companies stayed as Mid (18% return CAGR) and 79
slipped to the Mini category (-11% return CAGR). 4 companies were merged or de-listed.
Finally, of the 100 Mega companies in 2014, 75 stayed as Mega (12% return CAGR), 22 slipped
to Mid (1% return CAGR), and 3 slipped to the Mini category (-20% return CAGR).
Note: During the 2014-19 period, benchmark return was about 12%.
December 2019
37
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
We specifically analyze the 3 positive crossovers –
1. Mini-to-Mega
2. Mini-to-Mid and
3. Mid-to-Mega.
8.1 Mini-to-Mega: No company
During 2014-19, no company moved from Mini to Mega.
8.2 Mini-to-Mid: 42 companies, 43% average Price CAGR
During 2014-19, 42 companies crossed over from Mini to Mid category, generating an
average return CAGR of 43%, v/s 12% for the Sensex.
Of these 42 Mini-to-Mid stocks, 11 feature in our list of 100 Biggest Wealth Creators.
All stocks are within the top 20 Fastest Wealth Creators.
Exhibit 18
Mini-to-Mid (2014-19): 11 of 42 Mini-to-Mid stocks feature among top 100 Wealth Creators
Indiabulls Ventures
Bombay Burmah
Aarti Industries
Sundram Fasteners
Atul
Escorts
Edelweiss.Finance
SRF
NBCC
Manappuram Fin.
Bharat Financial
AVERAGE
Mkt Cap Rank
2019
2014
138
691
248
557
191
443
209
407
219
413
236
392
151
310
189
318
207
334
223
342
172
308
WC Rank *
Biggest Fastest
62
1
98
3
74
4
85
5
92
7
99
11
68
12
79
14
90
16
96
17
72
19
Price
CAGR %
78%
68%
67%
55%
52%
47%
47%
46%
45%
42%
41%
54%
PAT
CAGR %
35%
36%
26%
31%
14%
14%
35%
32%
8%
33%
70%
30%
P/E (x)
2019
2014
43
4
10
4
28
7
26
11
25
6
21
6
18
10
22
13
32
7
11
8
16
32
23
10
* 2014-19 Wealth Creation Rank
8.3 Mid-to-Mega: 14 companies, 34% average Price CAGR
During 2014-19, 14 companies crossed over from Mid to Mega.
Of these, 13 made it to this year’s list of 100 Biggest Wealth Creators. (Only IDBI Bank was
left out as much of its market cap increase was by way of fresh equity infusion rather than
price appreciation.)
The Mid-to-Mega Wealth Creators delivered average return CAGR of 37% over 2014-19 v/s
12% for Sensex.
December 2019
38
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Exhibit 19
Mid-to-Mega (2014-19): 13 of 14 companies feature among top 100 Wealth Creators
Bajaj Finance
Britannia Industries
UPL
Piramal Enterprises
Biocon
Havells India
HPCL
Berger Paints
Torrent Pharma
Petronet LNG
Indiabulls Housing
Bajaj Holdings
P & G Hygiene
AVERAGE
* 2014-19 Wealth Creation Rank
Mkt Cap Rank
2019
2014
15
124
39
115
60
141
57
120
81
135
61
101
71
108
95
139
89
126
79
111
82
140
78
103
85
109
WC Rank *
Biggest Fastest
7
2
17
10
33
20
31
22
38
28
32
31
35
32
45
34
44
41
41
43
43
44
40
53
42
54
Price
CAGR %
76%
49%
39%
38%
34%
33%
33%
32%
30%
30%
29%
27%
27%
37%
PAT
CAGR %
41%
25%
12%
L to P
12%
12%
43%
15%
-2%
26%
21%
9%
7%
17%
P/E (x)
2019
2014
44
12
64
26
27
8
29
–
51
21
61
26
6
9
64
32
55
13
17
15
9
5
12
6
83
34
37
16
Key Takeaway
Mid-to-Mega is a potent investment strategy
Every year, our analysis of market cap crossovers lead to the same findings –
Companies leap-frogging from Mini to Mega is very rare.
A fair number of companies move from Mini to Mid and deliver supernormal returns.
However, they need to be identified from a large base of about 500 companies.
The most potent and focused hunting ground for high-performing stocks is the Mid
category i.e. 200 stocks with market cap rank 101 to 300.
Over the next five years, 15-20 of these stocks will cross over to the Mega category and
deliver handsome returns in the process.
December 2019
39
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
#9
Wealth Creation: Valuation parameters analysis
Payback ratio < 1 offers distinctly superior returns
Every Wealth Creation Study invariably suggests that Payback Ratio < 1x is the most reliable
valuation metric for supernormal returns.
(Payback is a proprietary ratio of Motilal Oswal, defined as current market cap divided by
estimated profits over the next five years. For 2014, we calculate this ratio based on market
cap as on 31-Mar-2014 divided by the actual profits reported over the next five years).
Exhibit 20
Payback ratio less than 1x remains a sure shot formula for multi-baggers
Range
No. of
WC
% Share
CAGR (%)
RoE (%)
in 2014
Cos.
(INR b)
of WC
Price
PAT
2019
2014
P/E
<10
10-15
15-20
20-25
25-30
>30
Total
Price / Book
<1
1-2
2-3
3-4
4-5
5-6
>6
27
17
9
13
8
26
6,413
13,011
4,666
13,054
2,483
9,421
49,048
13
27
10
27
5
19
32
22
18
21
23
24
23
18
11
12
16
14
22
15
16
12
17
18
15
27
15
14
13
21
23
16
20
16
100
100
8
26
15
11
12
3
25
100
2,040
13,928
5,390
5,649
8,093
423
13,525
49,048
4
28
11
12
16
1
28
100
25
23
34
23
21
36
19
23
25
12
23
15
14
24
12
15
16
12
14
13
17
19
32
15
10
12
12
17
23
16
37
16
Total
Price / Sales
<1
1-2
2-3
3-4
>4
Total
Payback ratio
<1
1-2
2-3
>3
Total
24
27
18
13
18
100
10,654
6,208
9,082
7,387
15,717
49,048
22
13
19
15
32
100
25
30
25
19
20
23
21
17
4
14
14
15
14
15
10
18
21
15
10
16
15
19
25
16
26
26
22
26
100
7,977
12,767
18,620
9,685
49,048
16
26
38
20
100
36
24
19
23
23
23
18
10
12
15
15
14
16
23
15
12
12
21
25
16
December 2019
40
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
PEG < 1x is also a solid formula for superior returns
For the purposes of this section, PEG (P/E to Growth ratio) is obtained by dividing trailing
12-month P/E by future 5-year earnings CAGR.
We have used perfect foresight of 5 years’ earnings to calculate PEG. Thus, if a stock’s P/E in
2014 was 20x, and its 2014-19 PAT CAGR is 25%, its 2014 PEG works out to 0.8x (20 ÷ 25).
Clearly, lower the PEG, higher the likely return.
Our theme study last year almost conclusively established that stocks with PEG less than 1x
tend to significantly outperform the market.
As tabled below, the story was no different for the 2019 Wealth Creators. PEG < 0.5x
outperformed across all valuation metrics. Even stocks with PEG < 1.5x delivered higher than
average return.
Exhibit 21
PEG less than 1x is a solid formula for high returns
PEG Range
No. of
WC
% Share
CAGR (%)
in 2014 (x)
Cos.
(INR b)
of WC
Price
PAT
0.5
0.5-1
1-1.5
1.5-2
2-3
3
Others
16
20
20
11
12
11
10
100
3,766
6,129
18,493
2,867
7,817
6,292
3,685
49,048
8
12
38
6
16
13
8
100
52
25
26
20
15
21
20
23
32
22
17
9
10
8
-4
15
RoE (%)
2019
2014
20
17
13
20
27
19
6
15
14
12
14
19
30
28
13
16
Total
Note:
PEG here is calculated as P/E of March 2014 divided by 2014-19 PAT CAGR
“Others” are cases where PAT CAGR cannot be calculated e.g. turnarounds
December 2019
41
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
#10
The cash gushers and guzzlers
We list below the top 10 and bottom 10 Indian companies (all from non-Financials sector) in
terms of Reported PAT, Operating Cash Flow (OCF) and FCF. Reliance Industries is a paradoxical
case of generating the highest PAT and OCF, but the lowest FCF. One reason for this is its heavy
capex for its bolt-on petchem projects and Reliance Jio.
(For this section, OCF is calculated as Cash Profit adjusted for change in Debtors, Inventory and
Creditors. FCF is calculated as OCF minus Capex, including acquisitions. Further, cumulative
5-year is from FY15 to FY19. Over this period, BSE Sensex has returned 12% CAGR.)
Exhibit 22
Absolute PAT or Cash Flow numbers don’t guarantee stock price performance
INR billion
Reliance Industries
TCS
ONGC
HDFC Bank
IOC
Infosys
Coal India
HDFC
NTPC
ITC
Cumulative
5-year
5-yr PAT Price CAGR
1,589
24%
1,277
13%
1,082
-6%
796
25%
764
18%
716
13%
618
-4%
582
17%
547
6%
532
5%
INR billion
Tata Steel BSL
Reliance Comm.
IDBI Bank
Alok Industries
Punjab National Bank
JP Associates
Bank of India
IOB
Videocon Industries
MTNL
Cumulative
5-year
5-yr PAT Price CAGR
-312
-42%
-311
-50%
-308
-7%
-238
-11%
-208
-9%
-174
-37%
-170
-15%
-168
-22%
-143
-57%
-141
-5%
INR billion
Reliance Industries
ONGC
IOC
TCS
Bharti Airtel
Tata Motors
HDFC
Coal India
Infosys
NTPC
Cumulative
5-year
5-yr OCF Price CAGR
2,472
24%
1,689
-6%
1,228
18%
1,151
13%
1,147
1%
1,025
-15%
726
17%
724
-4%
693
13%
660
6%
INR billion
Reliance Comm.
JP Associates
Tata Steel BSL
Tata Tele. Maha.
MTNL
Reliance Naval
Jaypee Infratech
Prestige Estates
Alok Industries
Monnet Ispat
Cumulative
5-year
5-yr OCF Price CAGR
-512
-50%
-228
-37%
-181
-42%
-140
-16%
-118
-5%
-116
-21%
-91
-35%
-86
8%
-83
-11%
-76
-20%
INR billion
TCS
ONGC
Infosys
ITC
Wipro
Hindustan Zinc
Coal India
IOC
Maruti Suzuki
Hindustan Unilever
December 2019
Cumulative
5-year
5-yr FCF Price CAGR
1,040
13%
634
-6%
550
13%
442
5%
419
5%
390
17%
371
-4%
356
18%
312
28%
245
23%
INR billion
Reliance Industries
Reliance Comm.
Power Grid Corpn.
Tata Steel
Tata Motors
NTPC
UPL
Larsen & Toubro
SAIL
Tata Steel BSL
Cumulative
5-year
5-yr FCF Price CAGR
-1,047
24%
-683
-50%
-597
14%
-484
7%
-473
-15%
-389
6%
-371
39%
-215
10%
-212
-6%
-205
-42%
42
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
#11
Those who missed the Wealth Creators’ list
The big who didn’t beat the market
During 2014-19, the Sensex return CAGR was 11.6%.
19 companies (Exhibit 23) created enough wealth to qualify among the 100 biggest Wealth
Creators, but failed to make it to the final list as their stock return CAGR was lower than the
Sensex.
They made way for 19 others to join the list (Exhibit 24).
Exhibit 23
Those who missed the list …
Exhibit 24
… and those who made it
2014-19
SBI
ITC
L&T
HCL Tech.
NTPC
Wipro
GAIL (India)
Bajaj Auto
Bosch
M&M
Bharti Infra.
Zee Entmt.
United Brew.
Cadila Health.
Hindalco Inds.
Concor
Siemens
GSK Consumer
Cipla
WC *
(INR b)
1,013
786
754
578
350
333
302
242
237
231
215
165
152
144
135
127
127
122
117
Price
Potential
CAGR (%) Size Rank **
11
5
10
9
6
5
10
7
11
7
9
10
11
11
8
11
8
11
7
12
16
19
22
38
40
44
51
53
56
58
68
74
81
85
87
88
91
98
2014-19
IIFL Finance
Astral Poly
Bata India
Sundram Fasteners
Bayer Crop Science
P I Industries
Oberoi Realty
Mindtree
NBCC
Sundaram Finance
Atul
WABCO India
Tata Comm
GFL
Manappuram Finance
Trent
Bombay Burmah
Escorts
Exide Industries
WC *
Price
(INR b) CAGR (%)
113
110
108
106
105
104
103
101
100
100
93
88
88
86
86
85
84
83
83
41
38
20
55
24
30
19
23
45
21
52
27
15
28
42
29
68
47
13
Size
Rank
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
* - Wealth Created; ** Size rank had the stock outperformed the benchmark
December 2019
43
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
The fast who didn’t make it big
The 100th biggest Wealth Creator (Exide Industries) created Wealth of INR 83 billion.
Nearly 1,300 more companies beat the 2014-19 benchmark return CAGR of 11.6% but did
not make it to the list as they created absolute wealth less than INR 83 billion.
Exhibit 25 lists the top 20 fastest among them.
Exhibit 25
The fast who didn’t make it big
2014-19
Minda Industries
Garware Tech.
Phillips Carbon
Kama Holdings
Gayatri Projects
KNR Constructions
Bharat Rasayan
Tata Metaliks
IFB Industries
Balaji Amines
Price
Price
WC
CAGR (%) Mult. (x) (INR b)
92
26
79
80
19
23
73
16
28
72
15
36
71
15
27
71
15
34
67
13
16
66
13
15
65
12
36
65
12
15
Price
Price
WC
CAGR (%) Mult. (x) (INR b)
Aegis Logistics
64
12
62
Johnson Controls
64
12
51
Avanti Feeds
64
12
51
Sterlite Technologies
64
12
79
GMM Pfaudler
63
11
16
Caplin Point Lab
60
10
27
HEG
60
10
80
Navin Fluorine
59
10
32
Muthoot Capital
59
10
12
Can Fin Homes
58
10
40
2014-19
Note:
In choosing these companies, the condition is that base 2014 market cap is at least INR 1 billion
December 2019
44
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
#12
Wealth Destruction: Companies & Sectors
The cyclical downturn continues
The total Wealth Destroyed during 2014-19 is INR 8.6 trillion, 18% of the total Wealth Created
by top 100 companies. This is slightly higher than in the previous two studies (Exhibit 26),
mainly due to sharp correction in mid- and small cap stocks.
Telecom, Financials and Cyclicals
lead the Wealth Destruction pack (Exhibits 27 and 28).
Similar to last year’s study, the Financials sector has the unusual distinction of being the
biggest Wealth Creator (thanks to private banks and NBFCs) and also the second biggest
Wealth Destroyer (thanks to state-owned banks).
Exhibit 26
Level of Wealth Destruction sharply down
Wealth destroyed (INR bn)
% of Wealth Created by top 100 Wealth Creators
93
56
43
33
18
1
15
2
1,704
650
14
43
15
11
18
1
142
0
59
2,586
124
3,254 5,425 17,140 4,185 14,654 15,833 6,006 4,882 8,626
Exhibit 27
Exhibit 28
Wealth Destroyed
INR bn % Share
Price
CAGR (%)
Widespread damage, no pattern as such
Company
Vodafone Idea
Tata Motors
ONGC
Sun Pharma
Reliance Comm.
Coal India
Adani Enterprises
BHEL
Reliance Power
NMDC
Total of Above
Total Wealth Destroyed
1,043
760
679
373
320
312
243
205
166
151
4,253
8,626
12
9
8
4
4
4
3
2
2
2
49
100
-26
-15
-6
-4
-50
-4
-9
-11
-31
-6
Telecom, Financials, Cyclicals lead the pack
Wealth
%
Sector
Destroyed
Share
(INR bn)
Telecom
1,473
17
Banking & Finance
1,469
17
Metals / Mining
893
10
Auto
841
10
Oil & Gas
788
9
Capital Goods
515
6
Healthcare
506
6
Utilities
442
5
Const. / Real Estate
350
4
Others
1,351
16
Total
8,626
100
Key Takeaway
Is Wealth Destruction poised to rise further?
Post FY19 (the terminal year of this study), the situation has worsened for India Inc – NBFC
.
crisis, GDP slowdown, hangover of demonetization and GST, etc. The only key positive is cut in
corporate tax rate from about 35% to 25%. Despite this, corporate profit growth in first half of
FY20 is muted. If this situation persists, expect markets to correct further given rich valuations.
December 2019
45
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Appendix 1: MOSL 100: Biggest Wealth Creators (2014-2019)
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
Rank
Company
Reliance Industries
HDFC Bank
TCS
Hind. Unilever
HDFC
Kotak Mahindra Bank
Bajaj Finance
Infosys
Maruti Suzuki
Axis Bank
ICICI Bank
Bajaj Finserv
Asian Paints
IOC
Titan Company
IndusInd Bank
Britannia Industries
Hindustan Zinc
Nestle India
BPCL
UltraTech Cement
Power Grid Corpn
Pidilite Industries
JSW Steel
Shree Cement
Godrej Consumer
Yes Bank
Dabur India
Eicher Motors
Adani Ports
Piramal Enterprises
Havells India
UPL
Tech Mahindra
HPCL
Aurobindo Pharma
Marico
Biocon
Divi's Labs
Bajaj Holdings
Petronet LNG
P & G Hygiene
Indiabulls Housing
Torrent Pharma
Berger Paints
3M India
Motherson Sumi
Page Industries
Ashok Leyland
Kansai Nerolac
Company
Wealth Created
INR bn
Share (%)
5,636
11.5
4,085
8.3
3,655
7.5
2,391
4.9
1,800
3.7
1,795
3.7
1,594
3.3
1,497
3.1
1,420
2.9
1,209
2.5
1,117
2.3
994
2.0
907
1.8
878
1.8
777
1.6
756
1.5
639
1.3
626
1.3
577
1.2
522
1.1
497
1.0
487
1.0
480
1.0
458
0.9
453
0.9
413
0.8
405
0.8
405
0.8
398
0.8
394
0.8
385
0.8
366
0.7
357
0.7
342
0.7
327
0.7
312
0.6
310
0.6
281
0.6
270
0.6
267
0.5
266
0.5
245
0.5
244
0.5
242
0.5
235
0.5
231
0.5
223
0.5
205
0.4
186
0.4
183
0.4
Wealth Created
INR bn
Share (%)
CAGR (2014-19, %)
Price
PAT
Sales
24
14
5
25
21
20
13
11
12
23
12
6
17
15
19
28
24
20
76
41
36
13
7
11
28
19
14
22
-4
13
12
-17
8
55
16
48
22
12
8
18
24
1
34
14
13
29
19
22
49
25
10
17
5
9
17
8
4
21
15
2
13
3
12
14
22
17
32
16
11
23
80
11
27
7
16
19
23
6
27
1
24
18
11
4
28
43
8
15
19
18
38
L to P
24
33
12
3
39
12
15
12
8
13
33
43
3
25
16
19
27
18
11
34
12
14
20
12
14
27
9
1
30
26
0
27
7
8
29
21
24
30
-2
13
32
15
9
47
53
12
15
16
16
31
20
19
31
L to P
23
31
16
10
CAGR (2014-19, %)
Price
PAT
Sales
RoE (%)
2019
2014
10
20
39
102
21
13
18
24
12
16
14
17
30
9
29
16
48
16
47
20
12
13
23
2
17
20
23
34
18
19
-5
27
19
32
8
31
35
14
26
17
14
30
27
35
22
6
26
53
-23
14
RoE (%)
2019
2014
10
15
35
79
15
12
20
23
13
7
4
14
23
15
23
13
27
23
44
20
8
21
23
22
12
29
6
27
25
16
6
19
12
21
22
17
37
12
19
11
22
46
25
13
20
26
15
50
23
13
P/E (x)
2019
2014
15
21
22
36
17
24
12
18
24
11
13
8
43
11
32
19
26
9
44
8
30
12
35
63
24
39
9
35
43
23
N.A.
26
8
14
9
13
28
21
23
6
15
34
5
13
32
92
30
47
N.A.
31
P/E (x)
2019
2014
22
28
24
60
21
35
44
21
34
40
60
35
67
9
72
33
64
15
66
11
47
8
67
9
57
33
37
48
25
20
29
61
27
18
6
19
40
51
33
12
17
83
9
55
64
74
29
72
13
56
December 2019
46
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Appendix 1: MOSL 100: Biggest Wealth Creators (2014-2019) … continued
Rank
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
Rank
Company
Cholamandalam Inv.
TVS Motor Company
Muthoot Finance
Indraprastha Gas
Rajesh Exports
Honeywell Auto
Whirlpool India
Bharat Electronics
Colgate-Palmolive
Voltas
MRF
Indiabulls Ventures
LIC Housing Finance
Info Edge (India)
Gillette India
GRUH Finance
Balkrishna Industries
Edelweiss Finance
L&T Finance Holdings
Bharat Forge
Godrej Properties
Bharat Financial
The Ramco Cement
Aarti Industries
Jubilant Foodworks
Mphasis
Indian Hotels
Abbott India
SRF
City Union Bank
AIA Engineering
IIFL Finance
Astral Poly
Bata India
Sundram Fasteners
Bayer Crop Science
P I Industries
Oberoi Realty
Mindtree
NBCC
Sundaram Finance
Atul
WABCO India
Tata Comm
GFL
Manappuram Finance
Trent
Bombay Burmah
Escorts
Exide Industries
TOTAL / AVG
Company
Wealth Created
INR b
Share (%)
180
0.4
179
0.4
178
0.4
171
0.3
170
0.3
170
0.3
164
0.3
159
0.3
155
0.3
155
0.3
154
0.3
151
0.3
150
0.3
150
0.3
150
0.3
149
0.3
146
0.3
144
0.3
140
0.3
140
0.3
129
0.3
124
0.3
124
0.3
121
0.2
121
0.2
120
0.2
119
0.2
118
0.2
118
0.2
117
0.2
116
0.2
113
0.2
110
0.2
108
0.2
106
0.2
105
0.2
104
0.2
103
0.2
101
0.2
100
0.2
100
0.2
93
0.2
88
0.2
88
0.2
86
0.2
86
0.2
85
0.2
84
0.2
83
0.2
83
0.2
49,048
100.0
Wealth Created
INR bn
Share (%)
CAGR (2014-19, %)
Price
PAT
Sales
38
27
17
37
32
19
29
22
9
39
17
8
49
29
43
49
33
13
46
27
15
22
15
13
13
9
5
31
18
6
22
4
6
78
35
48
18
13
13
24
-1
15
27
38
2
30
20
19
33
10
7
47
35
34
16
30
20
19
18
9
31
12
19
41
70
41
28
35
7
67
26
12
22
22
15
20
28
24
18
L to P
2
33
18
10
46
32
14
36
14
8
26
7
8
41
17
12
38
20
18
20
11
7
55
31
11
24
-4
-4
30
16
10
19
21
26
23
11
18
45
8
20
21
7
-2
52
14
12
27
18
21
15
P to L
-1
28
50
11
42
33
14
29
L to P
3
68
36
9
47
14
-1
13
8
12
23
15
8
CAGR (2014-19, %)
Price
PAT
Sales
RoE (%)
2019
2014
19
16
22
17
21
18
18
20
15
13
21
11
19
17
20
13
52
82
13
13
9
22
7
44
15
17
3
13
32
8
24
29
16
25
13
8
17
10
19
17
9
7
23
15
11
5
19
18
26
22
20
6
6
-5
22
24
16
8
14
17
14
20
17
13
15
25
19
25
25
15
13
17
18
28
10
7
23
27
25
23
13
19
16
26
15
15
45
10
22
5
20
9
6
-1
19
15
17
13
13
16
15
16
RoE (%)
2019
2014
P/E (x)
2019
2014
19
11
32
26
12
8
27
12
15
7
55
31
47
24
12
10
45
38
40
23
25
11
43
4
11
9
275
80
85
125
45
30
26
10
18
10
14
21
23
22
87
35
16
32
34
45
28
7
59
59
17
28
66
N.A.
35
20
22
13
22
8
35
15
22
8
71
33
55
37
26
11
63
19
35
20
24
23
21
12
32
7
21
12
25
6
48
33
N.A.
112
9
20
11
8
121
N.A.
10
4
21
6
24
19
25
18
P/E (x)
2019
2014
Note:
L to P stands for Loss to Profit; P to L stands for Profit to Loss
December 2019
47
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Appendix 2: MOSL 100: Fastest Wealth Creators (2014-2019)
Rank
1
2
3
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
26
27
28
29
30
31
32
33
34
35
36
37
38
39
40
41
42
43
44
45
46
47
48
49
50
Rank
Company
Indiabulls Ventures
Bajaj Finance
Bombay Burmah
Aarti Industrie
Sundram Fasteners
Bajaj Finserv
Atul
Rajesh Exports
Honeywell Auto
Britannia Industries
Escorts
Edelweiss Finance
3M India
SRF
Whirlpool India
NBCC
Manappuram Fin.
IIFL Finance
Bharat Financial
UPL
Indraprastha Gas
Piramal Enterprises
Chola. Inv. & Fin.
Astral Poly
TVS Motor
City Union Bank
Titan Company
Biocon
Abbott India
Balkrishna Inds
Havells India
HPCL
Pidilite Industries
Berger Paints
Voltas
Kansai Nerolac
Ashok Leyland
Page Industries
Godrej Properties
GRUH Finance
Torrent Pharma
P I Industries
Petronet LNG
Indiabulls Housing
Muthoot Finance
IndusInd Bank
Trent
GFL
Eicher Motors
Kotak Mahindra
Company
2014-19 Price
CAGR (%) Times (x)
78
18
76
17
68
13
67
13
55
9
55
9
52
8
49
7
49
7
49
7
47
7
47
7
47
7
46
7
46
7
45
6
42
6
41
6
41
6
39
5
39
5
38
5
38
5
38
5
37
5
36
5
34
4
34
4
33
4
33
4
33
4
33
4
32
4
32
4
31
4
31
4
31
4
31
4
31
4
30
4
30
4
30
4
30
4
29
4
29
4
29
4
29
4
28
3
28
3
28
3
2014-19 Price
CAGR (%) Times (x)
CAGR 14-19 (%)
PAT
Sales
35
48
41
36
36
9
26
12
31
11
16
48
14
12
29
43
33
13
25
10
14
-1
35
34
53
12
32
14
27
15
8
20
33
14
17
12
70
41
12
15
17
8
L to P
24
27
17
20
18
32
19
14
8
14
13
12
14
18
10
10
7
12
3
43
3
16
11
15
9
18
6
16
10
L to P
23
20
19
12
19
20
19
-2
13
16
10
26
0
21
24
22
9
19
22
L to P
3
50
11
43
8
24
20
CAGR 14-19 (%)
PAT
Sales
Wealth Created
INR b Share (%)
151
0.3
1,594
3.3
84
0.2
121
0.2
106
0.2
994
2.0
93
0.2
170
0.3
170
0.3
639
1.3
83
0.2
144
0.3
231
0.5
118
0.2
164
0.3
100
0.2
86
0.2
113
0.2
124
0.3
357
0.7
171
0.3
385
0.8
180
0.4
110
0.2
179
0.4
117
0.2
777
1.6
281
0.6
118
0.2
146
0.3
366
0.7
327
0.7
480
1.0
235
0.5
155
0.3
183
0.4
186
0.4
205
0.4
129
0.3
149
0.3
242
0.5
104
0.2
266
0.5
244
0.5
178
0.4
756
1.5
85
0.2
86
0.2
398
0.8
1,795
3.7
Wealth Created
INR bn Share (%)
RoE (%)
2019 2014
7
44
20
18
19
15
19
18
25
15
14
17
16
26
15
13
21
11
27
48
17
13
13
8
26
6
16
8
19
17
25
23
20
9
17
13
23
15
12
19
18
20
6
-5
19
16
15
25
22
17
14
17
23
29
12
14
22
24
16
25
19
27
22
8
23
23
20
22
13
13
13
14
23
-23
50
53
9
7
24
29
13
35
18
28
22
14
25
27
21
18
13
16
6
-1
22
5
25
18
12
13
RoE (%)
2019 2014
P/E (x)
2019
2014
43
4
44
12
10
4
28
7
26
11
35
8
25
6
15
7
55
31
64
26
21
6
18
10
74
92
22
13
47
24
32
7
11
8
22
8
16
32
27
8
27
12
29
N.A.
19
11
71
33
32
26
22
8
72
32
51
21
35
20
26
10
61
26
6
9
67
35
64
32
40
23
56
31
13
N.A.
72
47
87
35
45
30
55
13
35
20
17
15
9
5
12
8
33
19
121
N.A.
9
20
25
43
35
24
P/E (x)
2019
2014
48
December 2019
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Appendix 2: MOSL 100: Fastest Wealth Creators (2014-2019) … continued
Rank Company
The Ramco Cement
Maruti Suzuki
Bajaj Holdings
P&G Hygiene
Gillette India
Yes Bank
Shree Cement
Marico
WABCO India
AIA Engineering
HDFC Bank
Aurobindo Pharma
Info Edge (India)
Reliance Industries
Bayer Crop Science
Mindtree
Hind. Unilever
JSW Steel
Asian Paints
Jubilant Foodworks
Bharat Electronics
MRF
Axis Bank
Sundaram Finance
BPCL
Divi's Labs.
Bata India
Mphasis
Oberoi Realty
Bharat Forge
Godrej Consumer
IOC
Indian Hotels
Dabur India
LIC Housing Finance
HDFC
Nestle India
Hindustan Zinc
L&T Finance
Adani Ports
Tata Comm
Motherson Sumi
Power Grid Corpn
TCS
Colgate-Palmolive
UltraTech Cement
Infosys
Exide Industries
ICICI Bank
Tech Mahindra
TOTAL / AVG
Rank Company
51
52
53
54
55
56
57
58
59
60
61
62
63
64
65
66
67
68
69
70
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95
96
97
98
99
100
2014-19 Price
CAGR (%) Times (x)
28
3
28
3
27
3
27
3
27
3
27
3
27
3
27
3
27
3
26
3
25
3
25
3
24
3
24
3
24
3
23
3
23
3
23
3
22
3
22
3
22
3
22
3
22
3
21
3
21
3
20
2
20
2
20
2
19
2
19
2
19
2
18
2
18
2
18
2
18
2
17
2
17
2
17
2
16
2
15
2
15
2
15
2
14
2
13
2
13
2
13
2
13
2
13
2
12
2
12
2
23
2014-19 Price
CAGR (%) Times (x)
CAGR (14-19, %)
PAT
Sales
35
7
19
14
9
1
7
8
38
2
1
24
7
16
18
11
18
21
7
8
21
20
16
19
-1
15
14
5
-4
-4
11
18
12
6
80
11
12
8
22
15
15
13
4
6
-4
13
7
-2
15
2
12
14
11
7
28
24
21
26
18
9
23
6
24
1
L to P
2
11
4
13
13
15
19
8
4
5
9
30
20
19
18
P to L
-1
16
16
22
17
11
12
9
5
3
12
7
11
8
12
-17
8
8
13
15
8
CAGR (14-19, %)
PAT
Sales
Wealth Created
INR bn Share (%)
124
0.3
1,420
2.9
267
0.5
245
0.5
150
0.3
405
0.8
453
0.9
310
0.6
88
0.2
116
0.2
4,085
8.3
312
0.6
150
0.3
5,636
11.5
105
0.2
101
0.2
2,391
4.9
458
0.9
907
1.8
121
0.2
159
0.3
154
0.3
1,209
2.5
100
0.2
522
1.1
270
0.6
108
0.2
120
0.2
103
0.2
140
0.3
413
0.8
878
1.8
119
0.2
405
0.8
150
0.3
1,800
3.7
577
1.2
626
1.3
140
0.3
394
0.8
88
0.2
223
0.5
487
1.0
3,655
7.5
155
0.3
497
1.0
1,497
3.1
83
0.2
1,117
2.3
342
0.7
49,048
100.0
Wealth Created
INR b Share (%)
RoE (%)
2019 2014
11
5
13
12
11
17
46
30
32
8
6
23
12
17
37
35
15
15
14
20
15
20
17
31
3
13
10
10
13
17
23
27
79
102
22
2
23
30
26
22
20
13
9
22
7
16
13
19
20
20
19
26
19
25
20
6
10
7
19
17
29
20
15
9
6
-5
27
34
15
17
15
21
44
47
23
16
17
10
16
19
45
10
15
26
21
13
35
39
52
82
8
12
23
24
13
16
4
14
21
32
15
16
RoE (%)
2019 2014
P/E (x)
2019
2014
34
45
34
24
12
6
83
34
85
125
37
9
57
24
40
28
48
33
35
15
28
21
19
13
275
80
22
15
63
19
21
12
60
36
9
63
67
43
59
59
12
10
25
11
40
11
21
12
11
8
33
23
55
37
17
28
24
23
23
22
33
39
9
11
66
N.A.
48
35
11
9
21
17
66
44
15
9
14
21
20
23
N.A.
112
29
30
8
12
24
22
45
38
47
30
21
18
24
19
60
13
18
14
25
16
P/E (x)
2019
2014
Note:
L to P stands for Loss to Profit; P to L stands for Profit to Loss
December 2019
49
 Motilal Oswal Financial Services
24th Annual Wealth Creation Study (2014-2019)
Appendix 3: MOSL 100 – Alphabetical order
WC Rank
Company
3M India
Aarti Industries
Abbott India
Adani Ports
AIA Engineering
Ashok Leyland
Asian Paints
Astral Poly
Atul
Aurobindo Pharma
Axis Bank
BPCL
Bajaj Finance
Bajaj Finserv
Bajaj Holdings
Balkrishna Industries
Bata India
Bayer Crop Science
Berger Paints
Bharat Electronics
Bharat Financial
Bharat Forge
Biocon
Bombay Burmah
Britannia Industries
Chola. Inv.& Fin.
City Union Bank
Colgate-Palmolive
Dabur India
Divi's Labs.
Edelweiss Finance
Eicher Motors
Escorts
Exide Industries
GFL
Gillette India
Godrej Consumer
Godrej Properties
GRUH Finance
HDFC
HPCL
Havells India
HDFC Bank
Hindustan Unilever
Hindustan Zinc
Honeywell Auto
IOC
ICICI Bank
IIFL Finance
Indiabulls Housing
Biggest Fastest
46
74
78
30
81
49
13
83
92
36
10
20
7
12
40
67
84
86
45
58
72
70
38
98
17
51
80
59
28
39
68
29
99
100
95
65
26
71
66
5
35
32
2
4
18
56
14
11
82
43
13
4
29
90
60
37
69
24
7
62
73
75
2
6
53
30
77
65
34
71
19
80
28
3
10
23
26
95
84
76
12
49
11
98
48
55
81
39
40
86
32
31
61
67
88
9
82
99
18
44
2014-19 Wealth Created
INR
bn
231
121
118
394
116
186
907
110
93
312
1,209
522
1,594
994
267
146
108
105
235
159
124
140
281
84
639
180
117
155
405
270
144
398
83
83
86
150
413
129
149
1,800
327
366
4,085
2,391
626
170
878
1,117
113
244
Price
Price
CAGR % Mult. (x)
47
67
33
15
26
31
22
38
52
25
22
21
76
55
27
33
20
24
32
22
41
19
34
68
49
38
36
13
18
20
47
28
47
13
28
27
19
31
30
17
33
33
25
23
17
49
18
12
41
29
6.8
12.8
4.2
2.0
3.2
3.9
2.7
5.0
8.2
3.1
2.7
2.6
16.9
8.9
3.4
4.2
2.5
2.9
3.9
2.7
5.5
2.4
4.3
13.4
7.3
5.0
4.6
1.8
2.3
2.5
6.9
3.4
6.9
1.8
3.5
3.3
2.4
3.8
3.8
2.2
4.1
4.1
3.1
2.8
2.2
7.4
2.3
1.8
5.6
3.6
Company
Indiabulls Ventures
Indian Hotels
Indraprastha Gas
IndusInd Bank
Info Edge (India)
Infosys
JSW Steel
Jubilant Foodworks
Kansai Nerolac
Kotak Mahindra
L&T Finance
LIC Housing Finance
Manappuram Fin.
Marico
Maruti Suzuki
Mindtree
Motherson Sumi
Mphasis
MRF
Muthoot Finance
NBCC
Nestle India
Oberoi Realty
P&G Hygiene
P I Industries
Page Industries
Petronet LNG
Pidilite Industries
Piramal Enterprises
Power Grid Corpn
Rajesh Exports
Reliance Industries
Shree Cement
SRF
Sundaram Finance
Sundram Fasteners
Tata Comm
TCS
Tech Mahindra
The Ramco Cement
Titan Company
Torrent Pharma
Trent
TVS Motor
UltraTech Cement
UPL
Voltas
WABCO India
Whirlpool India
Yes Bank
WC Rank
Biggest Fastest
62
77
54
16
64
8
24
75
50
6
69
63
96
37
9
89
47
76
61
53
90
19
88
42
87
48
41
23
31
22
55
1
25
79
91
85
94
3
34
73
15
44
97
52
21
33
60
93
57
27
1
83
21
46
63
97
68
70
36
50
89
85
17
58
52
66
92
78
72
45
16
87
79
54
42
38
43
33
22
93
8
64
57
14
74
5
91
94
100
51
27
41
47
25
96
20
35
59
15
56
2014-19 Wealth Created
INR
bn
151
119
171
756
150
1,497
458
121
183
1,795
140
150
86
310
1,420
101
223
120
154
178
100
577
103
245
104
205
266
480
385
487
170
5,636
453
118
100
106
88
3,655
342
124
777
242
85
179
497
357
155
88
164
405
Price
Price
CAGR % Mult. (x)
78
18
39
29
24
13
23
22
31
28
16
18
42
27
28
23
15
20
22
29
45
17
19
27
30
31
30
32
38
14
49
24
27
46
21
55
15
13
12
28
34
30
29
37
13
39
31
27
46
27
18.0
2.3
5.1
3.6
3.0
1.8
2.8
2.7
3.9
3.4
2.1
2.3
5.8
3.3
3.4
2.9
2.0
2.4
2.7
3.6
6.3
2.2
2.4
3.4
3.7
3.8
3.7
4.1
5.1
1.9
7.5
2.9
3.3
6.7
2.6
9.0
2.0
1.9
1.7
3.4
4.3
3.7
3.5
4.9
1.8
5.2
3.9
3.3
6.6
3.3
December 2019
50
 Motilal Oswal Financial Services
NOTES
 Motilal Oswal Financial Services
Explanation of Investment Rating
Investment Rating
BUY
SELL
NEUTRAL
UNDER REVIEW
NOT RATED
Expected return (over 12-month)
>=15%
< - 10%
> - 10 % to 15%
Rating may undergo a change
We have forward looking estimates for the stock but we refrain from assigning recommendation
*In
case the recommendation given by the Research Analyst is inconsistent with the investment rating legend for a continuous period of 30 days, the Research Analyst shall within following 30 days take appropriate measures to make the recommendation
consistent with the investment rating legend.
The following Disclosures are being made in compliance with the SEBI Research Analyst Regulations 2014 (herein after referred to as the Regulations).
Motilal Oswal Financial Services Ltd. (MOFSL) is a SEBI Registered Research Analyst having registration no. INH000000412. MOFSL, the Research Entity (RE) as defined in the Regulations, is engaged in the business of providing Stock broking services,
Investment Advisory Services, Depository participant services & distribution of various financial products. MOFSL is a subsidiary company of Passionate Investment Management Pvt. Ltd.. (PIMPL). MOFSL is a listed public company, the details in respect of which
are available on
www.motilaloswal.com.
MOFSL (erstwhile Motilal Oswal Securities Limited - MOSL) is registered with the Securities & Exchange Board of India (SEBI) and is a registered Trading Member with National Stock Exchange of India Ltd. (NSE) and
Bombay Stock Exchange Limited (BSE), Multi Commodity Exchange of India Limited (MCX) and National Commodity & Derivatives Exchange Limited (NCDEX) for its stock broking activities & is Depository participant with Central Depository Services Limited
(CDSL) National Securities Depository Limited (NSDL),NERL, COMRIS and CCRL and is member of Association of Mutual Funds of India (AMFI) for distribution of financial products and Insurance Regulatory & Development Authority of India (IRDA) as Corporate
Agent for insurance products. Details of associate entities of Motilal Oswal Financial Services Limited are available on the website at
http://onlinereports.motilaloswal.com/Dormant/documents/Associate%20Details.pdf
Details of pending Enquiry Proceedings of Motilal Oswal Financial Services Limited are available on the website at
https://galaxy.motilaloswal.com/ResearchAnalyst/PublishViewLitigation.aspx
MOFSL, it’s associates, Research Analyst or their relative may have any financial interest in the subject company. MOFSL and/or its associates and/or Research Analyst may have actual/beneficial ownership of 1% or more securities in the subject company in the
past 12 months.
MOFSL and its associate company(ies), their directors and Research Analyst and their relatives may; (a) from time to time, have a long or short position in, act as principal in, and buy or sell the securities or derivatives thereof of companies
mentioned herein. (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to
such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions.; however the same shall have no bearing whatsoever on the specific recommendations made by the analyst(s),
as the recommendations made by the analyst(s) are completely independent of the views of the associates of MOFSL even though there might exist an inherent conflict of interest in some of the stocks mentioned in the research report.
Research Analyst may have
served as director/officer, etc. in the subject company in the past 12 months. MOFSL and/or its associates may have received any compensation from the subject company in the past 12 months.
In the past 12 months , MOFSL or any of its associates may have:
a)
managed or co-managed public offering of securities from subject company of this research report,
b)
received compensation for investment banking or merchant banking or brokerage services from subject company of this research report,
c)
received compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company of this research report.
d)
Subject Company may have been a client of MOFSL or its associates in the past 12 months.
MOFSL and it’s associates have not received any compensation or other benefits from the subject company or third party in connection with the research report. To enhance transparency, MOFSL has incorporated a Disclosure of Interest Statement in this
document. This should, however, not be treated as endorsement of the views expressed in the report. MOFSL and / or its affiliates do and seek to do business including investment banking with companies covered in its research reports. As a result, the recipients
of this report should be aware that MOFSL may have a potential conflict of interest that may affect the objectivity of this report. Compensation of Research Analysts is not based on any specific merchant banking, investment banking or brokerage service
transactions. Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened for proprietary investments only. While calculating beneficial holdings, It does not consider demat accounts which are opened in name of MOFSL for
other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from clients which are not considered in above disclosures. Above disclosures include beneficial holdings lying in demat account of MOFSL which are opened
for proprietary investments only. While calculating beneficial holdings, It does not consider demat accounts which are opened in name of MOFSL for other purposes (i.e holding client securities, collaterals, error trades etc.). MOFSL also earns DP income from
clients which are not considered in above disclosures.
Terms & Conditions:
This report has been prepared by MOFSL and is meant for sole use by the recipient and not for circulation. The report and information contained herein is strictly confidential and may not be altered in any way, transmitted to, copied or distributed, in part or in
whole, to any other person or to the media or reproduced in any form, without prior written consent of MOFSL. The report is based on the facts, figures and information that are considered true, correct, reliable and accurate. The intent of this report is not
recommendatory in nature. The information is obtained from publicly available media or other sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its
accuracy, completeness or correctness. All such information and opinions are subject to change without notice. The report is prepared solely for informational purpose and does not constitute an offer document or solicitation of offer to buy or sell or subscribe for
securities or other financial instruments for the clients. Though disseminated to all the customers simultaneously, not all customers may receive this report at the same time. MOFSL will not treat recipients as customers by virtue of their receiving this report.
Analyst Certification
The views expressed in this research report accurately reflect the personal views of the analyst(s) about the subject securities or issues, and no part of the compensation of the research analyst(s) was, is, or will be directly or indirectly related to the specific
recommendations and views expressed by research analyst(s) in this report.
Disclosures:
Disclosure of Interest Statement
Analyst ownership of the stock
Companies where there is interest
No
A graph of daily closing prices of securities is available at
www.nseindia.com, www.bseindia.com.
Research Analyst views on Subject Company may vary based on Fundamental research and Technical Research. Proprietary trading desk of MOFSL or its
associates maintains arm’s length distance with Research Team as all the activities are segregated from MOFSL research activity and therefore it can have an independent view with regards to subject company for which Research Team have expressed their
views.
Regional Disclosures (outside India)
This report is not directed or intended for distribution to or use by any person or entity resident in a state, country or any jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL & its
group companies to registration or licensing requirements within such jurisdictions.
For Hong Kong:
This report is distributed in Hong Kong by Motilal Oswal capital Markets (Hong Kong) Private Limited, a licensed corporation (CE AYY-301) licensed and regulated by the Hong Kong Securities and Futures Commission (SFC) pursuant to the Securities and Futures
Ordinance (Chapter 571 of the Laws of Hong Kong) “SFO”. As per SEBI (Research Analyst Regulations) 2014 Motilal Oswal Financial Services Limited(SEBI Reg No. INH000000412) has an agreement with Motilal Oswal capital Markets (Hong Kong) Private
Limited for distribution of research report in Hong Kong. This report is intended for distribution only to “Professional Investors” as defined in Part I of Schedule 1 to SFO. Any investment or investment activity to which this document relates is only available to
professional investor and will be engaged only with professional investors.” Nothing here is an offer or solicitation of these securities, products and services in any jurisdiction where their offer or sale is not qualified or exempt from registration. The Indian Analyst(s)
who compile this report is/are not located in Hong Kong & are not conducting Research Analysis in Hong Kong.
For U.S:
Motilal Oswal Financial Services Limited (MOFSL) is not a registered broker - dealer under the U.S. Securities Exchange Act of 1934, as amended (the"1934 act") and under applicable state laws in the United States. In addition MOFSL is not a registered
investment adviser under the U.S. Investment Advisers Act of 1940, as amended (the "Advisers Act" and together with the 1934 Act, the "Acts), and under applicable state laws in the United States. Accordingly, in the absence of specific exemption under the Acts,
any brokerage and investment services provided by MOFSL, including the products and services described herein are not available to or intended for U.S. persons. This report is intended for distribution only to "Major Institutional Investors" as defined by Rule 15a-
6(b)(4) of the Exchange Act and interpretations thereof by SEC (henceforth referred to as "major institutional investors"). This document must not be acted on or relied on by persons who are not major institutional investors. Any investment or investment activity to
which this document relates is only available to major institutional investors and will be engaged in only with major institutional investors. In reliance on the exemption from registration provided by Rule 15a-6 of the U.S. Securities Exchange Act of 1934, as
amended (the "Exchange Act") and interpretations thereof by the U.S. Securities and Exchange Commission ("SEC") in order to conduct business with Institutional Investors based in the U.S., MOFSL has entered into a chaperoning agreement with a U.S.
registered broker-dealer, Motilal Oswal Securities International Private Limited. ("MOSIPL"). Any business interaction pursuant to this report will have to be executed within the provisions of this chaperoning agreement.
The Research Analysts contributing to the report may not be registered /qualified as research analyst with FINRA. Such research analyst may not be associated persons of the U.S. registered broker-dealer, MOSIPL, and therefore, may not be subject to NASD
rule 2711 and NYSE Rule 472 restrictions on communication with a subject company, public appearances and trading securities held by a research analyst account.
For Singapore:
In Singapore, this report is being distributed by Motilal Oswal Capital Markets Singapore Pte Ltd (“MOCMSPL”) (Co.Reg. NO. 201129401Z) which is a holder of a capital markets services license and an exempt financial adviser in Singapore,
as per the approved agreement under Paragraph 9 of Third Schedule of Securities and Futures Act (CAP 289) and Paragraph 11 of First Schedule of Financial Advisors Act (CAP 110) provided to MOCMSPL by Monetary Authority of Singapore. Persons in
Singapore should contact MOCMSPL in respect of any matter arising from, or in connection with this report/publication/communication. This report is distributed solely to persons who qualify as “Institutional Investors”, of which some of whom may consist of
"accredited" institutional investors as defined in section 4A(1) of the Securities and Futures Act, Chapter 289 of Singapore (“the SFA”). Accordingly, if a Singapore person is not or ceases to be such an institutional investor, such Singapore Person must
immediately discontinue any use of this Report and inform MOCMSPL.
Disclaimer:
The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced
in any form, without prior written consent. This report and information herein is solely for informational purpose and may not be used or considered as an offer document or solicitation of offer to buy or sell or subscribe for securities or other financial instruments.
Nothing in this report constitutes investment, legal, accounting and tax advice or a representation that any investment or strategy is suitable or appropriate to your specific circumstances. The securities discussed and opinions expressed in this report may not be
suitable for all investors, who must make their own investment decisions, based on their own investment objectives, financial positions and needs of specific recipient. This may not be taken in substitution for the exercise of independent judgment by any recipient.
Each recipient of this document should make such investigations as it deems necessary to arrive at an independent evaluation of an investment in the securities of companies referred to in this document (including the merits and risks involved), and should consult
its own advisors to determine the merits and risks of such an investment. The investment discussed or views expressed may not be suitable for all investors. Certain transactions -including those involving futures, options, another derivative products as well as
non-investment grade securities - involve substantial risk and are not suitable for all investors. No representation or warranty, express or implied, is made as to the accuracy, completeness or fairness of the information and opinions contained in this document. The
Disclosures of Interest Statement incorporated in this document is provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. This information is subject to change without any prior notice. The
Company reserves the right to make modifications and alternations to this statement as may be required from time to time without any prior approval. MOFSL, its associates, their directors and the employees may from time to time, effect or have effected an own
account transaction in, or deal as principal or agent in or for the securities mentioned in this document. They may perform or seek to perform investment banking or other services for, or solicit investment banking or other business from, any company referred to in
this report. Each of these entities functions as a separate, distinct and independent of each other. The recipient should take this into account before interpreting the document. This report has been prepared on the basis of information that is already available in
publicly accessible media or developed through analysis of MOFSL. The views expressed are those of the analyst, and the Company may or may not subscribe to all the views expressed therein. This document is being supplied to you solely for your information
and may not be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or
resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject MOFSL to any registration or licensing requirement within such jurisdiction.
The securities described herein may or may not be eligible for sale in all jurisdictions or to certain category of investors. Persons in whose possession this document may come are required to inform themselves of and to observe such restriction. Neither the Firm,
not its directors, employees, agents or representatives shall be liable for any damages whether direct or indirect, incidental, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
The
person accessing this information specifically agrees to exempt MOFSL or any of its affiliates or employees from, any and all responsibility/liability arising from such misuse and agrees not to hold MOFSL or any of its affiliates or employees responsible for any
such misuse and further agrees to hold MOFSL or any of its affiliates or employees free and harmless from all losses, costs, damages, expenses that may be suffered by the person accessing this information due to any errors and delays.
Registered Office Address: Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai-400025; Tel No.: 022 71934200/ 022-71934263; Website
www.motilaloswal.com.
CIN No.: L67190MH2005PLC153397.Correspondence Office Address: Palm Spring Centre, 2nd Floor, Palm Court Complex, New Link Road, Malad(West), Mumbai- 400 064. Tel No: 022 7188 1000.
Registration Nos.: Motilal Oswal Financial Services Limited (MOFSL)*: INZ000158836(BSE/NSE/MCX/NCDEX); CDSL and NSDL: IN-DP-16-2015; Research Analyst: INH000000412. AMFI: ARN - 146822; Investment Adviser: INA000007100; Insurance Corporate
Agent: CA0579 ;PMS:INP000006712. Motilal Oswal Asset Management Company Ltd. (MOAMC): PMS (Registration No.: INP000000670); PMS and Mutual Funds are offered through MOAMC which is group company of MOFSL. Motilal Oswal Wealth
Management Ltd. (MOWML): PMS (Registration No.: INP000004409) is offered through MOWML, which is a group company of MOFSL. Motilal Oswal Financial Services Limited is a distributor of Mutual Funds, PMS, Fixed Deposit, Bond, NCDs,Insurance
Products and IPOs.Real Estate is offered through Motilal Oswal Real Estate Investment Advisors II Pvt. Ltd. which is a group company of MOFSL. Private Equity is offered through Motilal Oswal Private Equity Investment Advisors Pvt. Ltd which is a group
company of MOFSL. Research & Advisory services is backed by proper research. Please read the Risk Disclosure Document prescribed by the Stock Exchanges carefully before investing. There is no assurance or guarantee of the returns. Investment in securities
market is subject to market risk, read all the related documents carefully before investing. Details of Compliance Officer: Name: Neeraj Agarwal, Email ID: na@motilaloswal.com, Contact No.:022-71881085.
* MOSL has been amalgamated with Motilal Oswal Financial Services Limited (MOFSL) w.e.f August 21, 2018 pursuant to order dated July 30, 2018 issued by Hon'ble National Company Law Tribunal, Mumbai Bench.
 Motilal Oswal Financial Services
 Motilal Oswal Financial Services
Motilal Oswal Wealth Creation Study Gallery