The most special feature of MOSt Research is the Wealth Creation Report. It is work of the foremost value investor in India and the joint MD and promoter– Mr. Raamdeo Agrawal. An equity research stalwart, Mr. Agrawal analyses the most consistent, the fastest and the biggest value creators in the Indian equity universe every year. Though the study is done every year, the report is timeless in its use. The report is unveiled at a special annual function, where the best are felicitated. The Wealth Creation Report is available on request as soft copy or printed format

1. www.motilaloswal.com12th Annual Wealth Creation Study
12th Annual
Wealth Creation Study
2002-2007
By Raamdeo Agrawal
December 14, 2007

2. www.motilaloswal.com12th Annual Wealth Creation Study
Concept
Wealth Creation:
The process by which a company enhances market
value of the capital entrusted to it by its shareholders

3. www.motilaloswal.com12th Annual Wealth Creation Study
Wealth Creation Study Methodology
Wealth Creators:
Companies which created at least Rs100 crores
of wealth between 2002 and 2007
(adjusted for corporate events such as mergers,
de-mergers, equity issues, etc)

4. www.motilaloswal.com12th Annual Wealth Creation Study
The 10 Biggest Wealth Creators
Rank Company Net Wealth Created Price Price
Rs crores % share Apprec. (X)
7.7
4.8
19.9
4.3
6.9
13.4
23.3
17.9
4.5
2.0
CAGR (%)
1 Reliance Inds. 185,551 11.4 50
2 O N G C 149,020 9.1 37
3 Bharti Airtel 136,578 8.4 82
4 Infosys Tech. 85,471 5.2 34
5 ICICI Bank 56,564 3.5 47
6 B H E L 51,201 3.1 68
7 S A I L 45,104 2.8 88
8 Larsen & Toubro 43,277 2.7 78
9 S B I 40,688 2.5 35
10 Wipro 39,361 2.4 15
Total of above 832,815 51.0
Total of 100 cos. 1,632,267 100.0

5. www.motilaloswal.com12th Annual Wealth Creation Study
The 10 Fastest Wealth Creators
Rank Company Price Appre- Price MCap 2002
ciation (X) CAGR (%) (Rs cr)
1 BF Utilities 665 267 13
2 Unitech 497 246 63
3 Anant Raj Inds. 401 232 4
4 Praj Inds. 274 207 9
5 Aban Offshore 144 170 44
6 Kirl. Brothers 110 156 35
7 Guj. Flouro 76 138 43
8 Sesa Goa 70 134 95
9 Areva T&D 57 124 76
10 Pantaloon Retail 51 120 59

6. www.motilaloswal.com12th Annual Wealth Creation Study
The Most Consistent Wealth Creators
Rank Company Appeared In 15-yr Price
WC Study (X) CAGR (%)
24
14
47
36
23
20
19
12
10
8
1 Hero Honda Motor 12
2 Ranbaxy Labs. 12
3 Wipro 11
4 Cipla 11
5 Dr Reddy's Labs. 11
6 H D F C 11
7 Asian Paints 10
8 ITC 10
9 Nicholas Piramal 10
10 GSK Pharma 10

7. www.motilaloswal.com12th Annual Wealth Creation Study
Wealthex v/s Sensex (2002-2007)
Year ending March 2002 2003 2004 2005 2006 2007 5-Year
CAGR (%)
BSE Sensex 3,469 3,049 5,591 6,493 11,280 13,072 30
YoY change (%) -12 83 16 74 16
Wealthex-rebased 3,469 3,529 7,706 9,590 16,671 19,261 41
YoY change (%) 2 118 24 74 16
Sensex EPS (Rs) 201 272 348 450 523 718 29
YoY change (%) 35 28 29 16 37
Sensex PE (x) 17 11 16 14 22 18
Wealthex EPS (Rs) 284 442 564 761 860 1,174 33
YoY change (%) 56 28 35 13 37
Wealthex PE (x) 12 8 14 13 19 16

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Wealth Creation by Industry
Industry (No. of cos.) Wealth Created (Rs cr) Share of WC (%)
Oil & Gas (7) 398,056 24
Banking & Finance (11) 208,313 13
Engineering (13) 171,086 10
IT (6) 168,659 10
Metals (10) 148,465 9
Telecom (2) 142,690 9
Auto (10) 96,116 6
FMCG (7) 65,405 4
Pharma (10) 60,118 4
Cement (5) 45,359 3
Others (8) 42,209 3
Constn / Real Estate (3) 37,691 2
Ultility (4) 25,307 2
Media (2) 14,652 1
Retail (2) 8,141 0
Total 16,32,267 100

9. www.motilaloswal.com12th Annual Wealth Creation Study
Wealth Creation by Mcap (Base Year)
Price CAGR by MCap : The rise of Indian Entrepreneurship
2002 Mid-Cap Range (Rs crores)
136
76
51 51
33
25
69
34
< 200 200-500 500-1000 1000-2000 2000-5000 5000-10000 10000-
20000
>20000
Avg Price CAGR: 41%

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Wealth Creation by Earnings Growth
Earnings Growth Range (%)
28 28
46
52
70
32
68
0-10 10-20 20-30 30-40 40-50 50-70 >70
Avg Price CAGR: 41%
Price CAGR by Earnings Growth Range : Higher the better

11. www.motilaloswal.com12th Annual Wealth Creation Study
Wealth Creation based on ROE
?
Price CAGR by ROE in 2002 :
Bargains are found when the markets are blind to change
72 69
45
30
39
27
25
17
<5 5-10 10-15 15-20 20-25 25-30 30-40 >40
Avg Price CAGR:41%
Return-risk balance
Bargains
2002 ROE Range (%)

12. www.motilaloswal.com12th Annual Wealth Creation Study
Wealth Creation by Age Group
Price CAGR by Age Range : Young companies have speed
Age range in years
100
49
106
39
45
35
313134
0-10 11-20 21-30 31-40 41-50 51-60 61-70 71-80 81-90 >90
Avg Price CAGR : 41%

13. www.motilaloswal.com12th Annual Wealth Creation Study
PSUs v/s Private Companies
Value Migration from Public to Private sector
49
25
28
30
26
18
36
51
1999-2004 2000-2005 2001-2006 2002-2007
% Wealth Created No. of PSUs

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“There is absolutely no substitute for paying right price.
In the Bible, it says that love covers a multitude of sins.
Well, in the investing field, price covers a multitude of mistakes.
For human beings, there is no substitute for love. For investing
there is no substitute for paying right price – absolutely none.”
— Van Dan Berg, OID, April 2004
Wealth Creation by Value Parameters

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Wealth Creation by Value Parameters
Purchase price is critical
BASE YEAR P/E
2002 P/E (x) No of Cos. Share of WC (%) Price CAGR (%)
< 5 23 21 56
5-10 29 40 44
10-15 14 15 43
15-20 14 8 37
> 20 20 16 28
Total 100 100 41
BASE YEAR PRICE/BOOK
2002 Price to Book (x) No of Cos. Share of WC (%) Price CAGR (%)
< 1 45 28 65
1-2 29 48 43
> 2 26 24 28
Total 100 100 41

16. www.motilaloswal.com12th Annual Wealth Creation Study
Top Wealth Destroyers (2002-2007)
Even Blue Chips can turn Red !!
Company Wealth Destroyed Price
Rs Crores % Share CAGR (%)
Hindustan Unilever 4,442 31 -2
Pentamedia Graphics 3,289 23 -47
H P C L 1,495 11 -3
Silverline Technologies 317 2 -4
Mascon Global 252 2 18
Morepen Labs. 245 2 -4
LML 219 2 -14
Rashel Agrotech 213 2 -61
Baffin Engg. 205 1 -50
Total of above 10,676 75 -3
Total Wealth Destroyed 14,155 100 -4

17. www.motilaloswal.com12th Annual Wealth Creation Study
Theme 2008
India :
The Next Trillion $$$ Opportunity !!

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101
136
184
198
210
246
293
317
260
324
386
414
461
509
696
1,006
2,003
1,355
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009E
2011E
First US$ Trillion
Second US$ Trillion
CAGR of 14.8%
CAGR of 6.2% for 25 years
CAGR of 16% in 5 years
US$100 bn to US$1,000 bn - 30 Years
US$1,000 bn to US$2,000 bn - 5 Years
India’s Journey – 1977 to 2012

19. www.motilaloswal.com12th Annual Wealth Creation Study
India Shining … in the world too!
1.0
1.1
1.2
1.3
1.4
1.5
1.6
1.7
1.8
1.9
2.0
1980
1982
1984
1986
1988
1990
1992
1994
1996
1998
2000
2002
2004
2006
1.9% of World GDP of $11 Trillion
1.1% of World GDP of $25 Trillion
1.8% of World GDP of $48 Trillion
1.0
2.0
3.0
4.0
5.0
1980
1985
1990
1995
2000
2005
Following the Chinese trail …
India
China
India: Share of World GDP (%)

20. www.motilaloswal.com12th Annual Wealth Creation Study
Exponentiality in the NTD Era
• Macro-economic exponentiality
• Exponentiality in key industries
• Corporate profit exponentiality
• Valuation exponentiality

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Macro economic exponentiality
— Consumption
— Government
— Investment
— External Sector

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73.9 75.1 71.0 67.3 66.2 65.2
56.4 56.4
18.8 19.0 22.6
20.4 18.3 19.5
18.7 22.6
6.7 8.4 8.2
12.3 16.6 16.2
27.7 23.8
-2.8-2.8-0.9-1.2-1.8-2.5
0.5
1977 1982 1987 1992 1997 2002 2007 2012
Consumption (%) Govt (%) Pvt Invt (%) Net exports (%)
GDP
( US$ b )
101 190 246 268 386 480 1,006 2,003
The Big Picture
India’s GDP breakdown (exp. approach) – C + G + I + X

23. www.motilaloswal.com12th Annual Wealth Creation Study
Consumption exponentiality

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Accelerating Per Capita GDP, but …
451
357
897
1,657
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Per Capita GDP expected to grow to US$1,657
in 2012 from US$897 in 2007
Acceleration in Per Capita
GDP from 2000
CAGR of 2.4%
CAGR of 10.3%
CAGR of 12.8%

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14.6 15.4 17.1 18.7
20.6
23.3
45.1
39.8
35.0
30.8
27.0
64.1
62.8
61.8
59.7
57.9
56.9 56.8 56.8 56.7 56.6 56.4
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Private final conspn. exp. (Rs lakh cr)
PFCE (% to GDP)
… Consumption Lagging GDP Growth
PRIVATE FINAL CONSUMPTION EXPENDITURE TO GDP (%)

26. www.motilaloswal.com12th Annual Wealth Creation Study
… Consumption Lagging GDP Growth
Consumption & Saving pattern determined by income distribution
60
30
10
Population (mln)
30
36
34
Share of Income
33
37
30
Share of Cons. Exp.
Top 10% income
Next 30% income
Bottom 60%

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Consumption Exponentiality – Comforts & Luxuries
% TO GDP
CAGR (%)
2000-06 2006-15
Nominal GDP 10.6 14.2
Consumption Exp. 8.7 13.8
Luxuries 15.9 16.6
Comforts 13.8 15.6
Necessities 4.6 11.3
High-growth categories
Beverages 25.3 19.5
Communication 18.4 19.5
Educ. & Recreation 12.3 18.6
Personal transport 17.5 18.1
Hotels & restaurants 13.0 17.2
Healthcare 16.3 17.2
42.1
36.3
30.2
23.9
11.9
13.6
14.1
15.7
10.3
12.8
13.6
16.4
2000 2003 2006 2015
64.2
62.8
57.9
56.0
Necessities
Comforts
Luxuries

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Government finance exponentiality

29. www.motilaloswal.com12th Annual Wealth Creation Study
Tax Buoyancy Boosts Government Finance
India’s Tax Collection to GDP is rising
10,56,100
7,34,200
4,66,500
1,87,1001,71,700
3,04,900
13.4
8.2
11.6
10.3
8.8
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Direct Tax Indirect Tax Tax % to GDP

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Revenue Deficit As % Of GDP : down to zero in 2008-09
4.4
3.6
2.5
7.0
5.8
2.7
1.2
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Centre
Combined Centre & State
Exponential Impact of Tax Buoyancy

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Combined Fisc capped at 6% of GDP : thrust on capex
6.2
4.5
3.7 3.0 3.0
9.9
8.5
6.7
6.0 6.0
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Centre
Combined Centre & State
Exponential Impact of Improved Govt Finance

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Investment exponentiality

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Exponential thrust on infrastructure
Infrastructure Spend rising to 9.2% of GDP by end of XI Plan
7,38,049
4,43,606
2,50,490
1,75,089
1,14,053
5.6
9.2
7.2
6.0
5.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Infra. spend (Rs cr)
% to GDP
CAGR of 17%
CAGR of 24%

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Exponential growth in private sector investment
Housing and corporate capex drive capital formation
12,69,500
11,42,700
9,40,000
7,65,900
6,00,500
4,71,200
3,64,800
26.727.4
26.4
24.5
21.7
19.2
16.0
2002 2003 2004 2005 2006 2007 2008
Private Capex (Rs cr)
Private Capex (% to GDP)

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External Sector exponentiality

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India’s Foreign Trade
17 18 18 19 22 26 32 33 35 33 37 44 44
53
64
84
103
126
-21 -24 -20 -22 -23 -29 -37 -39 -42 -42 -50 -50 -52
-62
-78
-111
-149
-190
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Exports - $ B
Imports - $ B
2002-07 CAGR : 23%
2002-07 CAGR : 30%

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-1.0
-1.3
-0.4
2.5
1.4
0.8
-0.6
-1.1-1.1
-1.5-1.3
-1.8
-1.2
-0.5
-1.6
-0.5
-3.4
4.5
3.2
4.4
3.0
2.3
1.92.1
2.5
2.1
2.5
3.1
0.7
2.5
3.6
2.4
2.0
3.0
200720052003200119991997199519931991
Current Account Balance (% of GDP)
Foreign Capital Inflow (% of GDP)
Forex capital flows higher than CAD

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199
152
141
110
75
54
4238
32
2622
1721
15
662
2007
2006
2005
2004
2003
2002
2001
2000
1999
1998
1997
1996
1995
1994
1993
1992
1991
Exponential Rise in Forex Reserves
Figures in US$ billion

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Exponentiality in key industries

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Financial Services
High Level Of Domestic Savings
113
134
179
216
261
313
384
437
498
567
646
32.332.332.4
23.5
29.7
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
Gross Domestic Savings (US$ B) Gross Domestic Savings / GDP (%)
Cumulative
$900 b
Cumulative
$2,500 b

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Financial Services
India’s Credit / GDP (%) among the lowest in the world
319
224
206
185
168
144
136
133
111
110
86
83
71
57
51
136
51
Japan
USA
Canada
South Africa
UK
Malaysia
China
Germany
New Zealand
Thailand
France
Chile
Brazil
Singapore
Turkey
Philippines
India

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Wireless Telecom
Mobile Penetration (% Of Population) - India Vs China
35.1
30.1
25.8
20.9
11.4
16.0
14.3
8.6
5.0
3.2
1.20.6
2001 2002 2003 2004 2005 2006
CHINA
INDIA

43. www.motilaloswal.com12th Annual Wealth Creation Study
Cars
Cars ('000 nos.) - India Vs China
571
507 607
704
1,092
2,071
2,276
2,770
3,870
410
639
591 558 612
819
981
1,052
1,269
1998
1999
2000
2001
2002
2003
2004
2005
2006
CHINA
INDIA

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Engineering & Construction
Beneficiary of huge spend in infrastructure
7,38,049
4,43,606
2,50,490
1,75,089
1,14,053
5.6
9.2
7.2
6.0
5.0
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Infra. spend (Rs cr)
% to GDP
CAGR of 17%
CAGR of 24%

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Cement
Cement Production (Million Tonnes) - India Vs China
536512
573
597
661
725
862
967
1,069
1,240
77 82 94 94
102 111 117 126 142
155
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
CHINA
INDIA

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Steel
Crude Steel Production (Million Tonnes) - India Vs China
283
222
353
420
32 32
39 43
2003 2004 2005 2006
CHINA
INDIA

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Market Outlook

48. www.motilaloswal.com12th Annual Wealth Creation Study
High Corporate Tax Buoyancy
Past Corporate Tax Buoyancy – multiple of nominal GDP growth
Financial Year Corporate Tax Buoyancy
1995-96 2.19
1996-97 2.21
1997-98 2.18
1998-99 2.22
1999-00 2.25
2000-01 2.26
2001-02 2.29
2002-03 2.29
2003-04 2.33
2004-05 2.29
2005-06 2.31

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Healthy Corporate Sector Profit Growth
Corporate Profits To GDP (%) : At all time highs
1.3
1.6
2.2
3.5
2.4
1.8
2.1
5.0
3.1
5.8
6.7
7.8
1990
1992
1994
1996
1998
2000
2002
2004
2006
2008
2010
2012

50. www.motilaloswal.com12th Annual Wealth Creation Study
Interest Rate scenario benign-to-favourable
10-year GSec yield : seems to have plateau-ed
11.7
5.1
7.9
14
4.0
6.5
9.0
11.5
14.0
Nov-92
Nov-93
Nov-94
Nov-95
Nov-96
Nov-97
Nov-98
Nov-99
Nov-00
Nov-01
Nov-02
Nov-03
Nov-04
Nov-05
Nov-06
Nov-07

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Earnings yield to bond yield < 15-year average
0.6
1.8
0.2
0.0
0.3
0.6
0.9
1.2
1.5
1.8
Nov-92
Nov-93
Nov-94
Nov-95
Nov-96
Nov-97
Nov-98
Nov-99
Nov-00
Nov-01
Nov-02
Nov-03
Nov-04
Nov-05
Nov-06
Nov-07
15 Year Average: 0.74x

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Market Cap to GDP (%) - All Time High
19
54
24
43 43 44
29
51
26 26
23
43
54
85 86
136
34
37
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
Nov-07

53. www.motilaloswal.com12th Annual Wealth Creation Study
Sensex EPS & PE
Future EPS growth of 20% - slower than 30% of last five years
201
1,772
1,477
1,231
1,026
523
348
272
450
718
876
2002 2003 2004 2005 2006 2007 2008E 2009E 2010E 2011E 2012E
CAGR of 29%
CAGR of 20%
0
5
10
15
20
25
30
35
40
45
Nov-07Nov-04Nov-01Nov-98Nov-95Nov-92
15 Year Median: 15.7x
P/E higher than 15-year median

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• Bargains are made when markets are blind to large
opportunities, positive changes or sustained growth
• Losses are guaranteed when one grossly overpays
• India's next trillion dollar journey will see distinctly buoyant
corporate profits; boom in savings & investment
• At current market valuations, margin of safety is low
• High liquidity could lift the market to rich valuation levels
for quite some time
In Conclusion

55. www.motilaloswal.com12th Annual Wealth Creation Study
Thank You
&
Happy Wealth Creating
in the NTD era !!