Motilal Oswal Research had come up with their Annual Wealth Creation Study last week. The study defines wealth creation as the process by which a company enhances the market value of its capital and is measured as the increase in market capitalisation over a period. The 29th edition of the study has identified the top 100 wealth-creating companies over FY19-24. Companies whose market-cap grew the most in absolute terms and whose market-cap compounded growth rate exceeded that of Nifty 50 TRI made it to the list. One of the prominent highlights of the report is the increased participation of PSUs in the wealth-creation process. Key aspects of the same are illustrated below.

PSUs’ share of wealth creation on the rise

The 100 companies on the list raked in wealth of ₹138 lakh crore in total, of which 17 per cent has been contributed by PSUs. The number of PSU wealth creators in the list is also on the rise, surpassing that for the period FY04-09.

PSU banks drive wealth creation

Of the 20 PSU wealth creators (FY19-24), almost one in two are from the banking and finance sector, driven by profits of nine financial companies rising 19 times over the five financial years.

Healthy fundamentals aid wealth creation

Wealth creation by PSUs is backed by strong fundamentals. Performance metrics (FY19-24) of the 20 PSU wealth creators look better than those of their private counterparts. They have also upped their efficiency game, as can be seen in the RoE (return on equity) improvement.

Valuation multiple shrinks for PSUs

The price-to-earnings (P/E) multiple of the 20 PSUs has shrunk from the levels of FY19, driven by robust growth in earnings. For the private counterparts, the P/E multiple has risen primarily due to re-rating backed by bullish sentiment, besides growth in earnings.