The document summarizes the findings of a 19th annual wealth creation study covering 2009-2014. It identifies the top 100 wealth creators in India as measured by increase in market capitalization adjusted for corporate actions. TCS created the most wealth at Rs. 3,63,799 crores, with a price CAGR of 51%. Eicher Motors, Bajaj Finance, and Supreme Industries were among the fastest wealth creators, with price increases over 88%. The document also discusses factors contributing to wealth creation such as quality businesses, management, growth, and purchasing undervalued stocks. Overall, IT, consumer, financial, auto and healthcare sectors contributed most to wealth creation, while PSUs destroyed the most wealth.

1. 100x
19th Annual Wealth Creation Study 2009-2014
By Raamdeo Agrawal
12 December 2014

2. 1
Discussion Points
 19th Wealth Creation Study Findings
 Theme: 100x – The power of growth in Wealth Creation
 Market Outlook
 Conclusions
IMPORTANT DISCLAIMER
• This study is primarily an analysis of economic data, company financials and stock prices.
• The companies mentioned here should not be construed as our investment
recommendations or opinions.

3. 2
Wealth Creation 2009-14
Study Findings

4. 3
Concept of Wealth Creation
The process by which a company enhances market value
of the capital entrusted to it by its shareholders
Net Wealth Created
Change in Market Cap over the study period (2009-14),
adjusted for corporate actions like dilutions
Study Methodology

5. 4
Biggest Wealth Creators
Top 100 Wealth Creators subject to the condition that
stock performance beats the benchmark (Sensex)
Fastest Wealth Creators
The top 100 wealth creators are sorted by fastest rise
in their adjusted stock price
Most Consistent Wealth Creators
Based on number of times a company appeared in the
last 10 studies and 10-year price CAGR
Study Methodology (contd)

6. 5
Rank,
Company
NWC
(Rs cr)
Price
CAGR
1. TCS 3,63,799 51
2. ITC 2,07,336 31
3. HDFC Bank 1,30,715 31
4. Infosys 1,12,294 20
5. ICICI Bank 1,03,511 30
Rank,
Company
NWC
(Rs cr)
Price
CAGR
6. Wipro 99,323 30
7. Sun Pharma 95,801 39
8. Tata Motors 94,460 62
9. H D F C 93,411 26
10. HCL Tech 89,810 69
Top 10 Biggest Wealth Creators
 TCS is largest Wealth Creator for the 2nd consecutive year;
Rs3.6 lakh crores is highest ever Wealth Created
 Total wealth created during 2009-14: Rs29+ lakh crores

7. 6
Rank,
Company
Mult.
(x)
Price
CAGR
1. Eicher Motors 27 94
2. Bajaj Finance 27 93
3. Supreme Inds 24 88
4. Amara Raja 21 84
5. Page Industries 18 78
Rank,
Company
Mult.
(x)
Price
CAGR
6. IndusInd Bank 16 73
7. HCL Tech 14 69
8. Aurobindo Ph. 13 68
9. Havells India 13 67
10. Ipca Labs 13 67
Top 10 Fastest Wealth Creators
 Eicher, Supreme and Page in top 10 last 3 studies in a row
 HCL Tech in the top 10 of both the Biggest and the Fastest
 7 of the10 had base market cap less than Rs 1,000 crores
 7 of the 10 traded at single-digit P/E in 2009

8. 7
Rank,
Company
WCS
(x)
04-14
CAGR
1. Kotak Mahindra 10 34
2. Asian Paints 10 34
3. Sun Pharma 10 33
4. Hindustan Zinc 10 29
5. ITC 10 26
Rank,
Company
WCS
(x)
04-14
CAGR
6. Axis Bank 10 26
7. HDFC Bank 10 26
8. M & M 10 24
9. Bosch 10 23
10. Nestle 10 23
Most Consistent Wealth Creators
 8 of top 10 are consumer-facing companies
 Consistent Wealth Creation = Sustainable & Profitable Growth
 Sustainable & Profitable Growth = Quality (Business X Mgmt)

9. 8
Wealth Creators v/s Sensex
 Superior Earnings Growth = Superior Wealth Creation
 Wealth Creators’ outperformance almost fully explained
by higher earnings growth; P/E re-rating similar to Sensex
Mar-09 Mar-14 5-yr CAGR
BSE Sensex 9,709 22,386 18
Wealthex – re-based 9,709 42,226 34
Sensex EPS (Rs) 820 1,340 10
Wealthex EPS (Rs) 753 2,197 24
Sensex PE (x) 12 17 7
Wealthex PE (x) 13 19 8

10. 9
Wealth Creation by Industry
 Major change in Wealth Creation mix in 5 years –
* Oil & Gas, Metals, Cap Goods Telecom lose ground
* IT, Consumer, Financials, Auto, Healthcare surge
 Wealth Creation by IT is highest ever in 5 years:
22% higher than Rs5.8 lakh crores by Oil & Gas in 2003-08
Industry
(No of cos.)
WC
(Rs cr)
2014
(%)
2009
(%)
Technology (6) 7,10,304 24 5
Consumer (23) 5,96,084 20 11
Financials (20) 5,67,860 19 9
Auto (13) 3,36,374 11 4
Healthcare (13) 2,73,773 9 4
Capital Goods (5) 1,22,646 4 12
Industry
(No of cos.)
WC
(Rs cr)
2014
(%)
2009
(%)
Cement (5) 1,18,320 4 2
Metals/Min. (4) 70,713 2 15
Tele./Media (3) 60,832 2 11
Oil & Gas (2) 26,750 1 22
Others (6) 54,450 2 4
Total 29,38,106 100 100

11. 10
Wealth Creation by PSUs hit the floor
 Over the years, value has migrated from PSUs to
private companies across sectors – Telecom, Mining,
Utilities, Capital Goods, Banking, Oil & Gas, etc.
28 30 26
18
25
16
22 24 20
11
5
49
51
36
25
35
27
30
27
20
9
2
2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
5-years ending
No. of PSUs % Wealth Created

12. 11
Wealth Creation & Valuation Metrics
 Market folly is a big source of multi-baggers
Depressed market conditions in 2009 allowed several high quality
stocks to be bought at low valuations (e.g. TCS at 10 P/E)
P/E in
2009
No. of
Cos.
% Wealth
Created
Price
CAGR %
PAT
CAGR %
<10 45 43 42 27
10-15 20 19 30 17
15-20 18 18 32 25
20-25 9 16 28 21
>25 8 4 30 39
Total 100 100 34 24

13. 12
Wealth Creation & Valuation Metrics (contd)
 As a rule, P/B up to 2x may be considered attractive
(high performance of 3-4x is led by TCS’s 51% Price CAGR)
P/B (x) No. of
Cos.
% Wealth
Created
Price
CAGR %
PAT
CAGR %
<1 22 11 39 30
1-2 28 23 38 30
2-3 17 21 31 18
3-4 11 20 44 24
>4 22 26 28 17
Total 100 100 34 24

14. 13
 Payback ratio (Mkt Cap / 5-years forward PAT) of less
than 1x in 2009 ensured superior wealth creation.
 Payback < 1 remains the most reliable indicator of
superior Wealth Creation across market cycles.
Payback
Ratio (x)
No. of
Cos.
% Wealth
Created
Price
CAGR %
PAT
CAGR %
<1 46 44 45 32
1-2 40 40 30 18
2-3 14 17 27 16
Total 100 100 34 24
Wealth Creation & Valuation Metrics (contd)

15. 14
Wealth Destruction
 5 of top 10 Wealth Destroyers are PSUs
 RCom is among top 10 Wealth Destroyers 4th time in a row
Company Wealth Destroyed Price
Rs crores % Share CAGR (%)
MMTC 65,378 16 -40
NTPC 49,679 12 -8
B H E L 25,472 6 -8
JP Power Ventures 12,555 3 -13
Reliance Power 12,121 3 -7
S A I L 10,347 2 -6
GMR Infrastructure 9,975 2 -14
Reliance Communications 7,927 2 -6
Unitech 7,479 2 -17
NMDC 6,839 2 -2
Total of Above 2,07,771 50
Total Wealth Destroyed 4,18,518 100

16. 15
100x

17. 16
Theme Discussion Points
 100x: What & Why
 100x: The Indian experience (1994-2014)
 100x: Alchemy of SQGLP
 100x: How to apply for the future

18. 17
To make money in stocks you must have –
 the vision to see them
 the courage to buy them and
 the patience to hold them.
Patience is the rarest of the three.
– Thomas Phelps in 100 to 1 In The Stock Market
Powerful mantra for big Wealth Creation

19. 18
What is 100x?
 “100x” refers to stock prices rising 100-fold over time
 The exact number “100” is not so important
 What is important is –
100x opens the mind to the power of long-term
compounding in equity investing

20. 19
100x & Compounding
Understanding the Time-Rate combination for 100x

21. 20
Why 100x?
Warren Buffett on investing and purchasing power
“Investing is often described as the process of laying out money
now in the expectation of receiving more money in the future.
At Berkshire Hathaway we take a more demanding approach,
defining investing as the transfer to others
of purchasing power now with the reasoned expectation
of receiving more purchasing power in the future – net of
taxes on nominal gains and inflation.”

22. 21
Initial Purchasing Power Value after 20 years Purchasing Power
after 20 years
(net of 7% inflation)
Why 100x?
100x enables accumulation of massive purchasing power
1
26
Debt Equity
(7%) (25%)
1 41
100
Debt Equity
(7%) (25%)
Debt Equity
(7%) (25%)

23. 22
100x – The Indian Experience
Indian benchmark indices rise 100x in 30 years

24. 23
100x – The Indian Experience
Two kinds of 100x stocks in last 20 years (1994-2014):
1. TRANSITORY
— mainly fads and cyclicals which fizzled out after rising 100x
— Satyam Computer, SSI, Unitech, Jai Corp, Mercator, etc
2. ENDURING
— meaningful size and scale of operations
— saw stock prices rise 100x or more during the period
— and most importantly, maintained their 100x status
even as of March 2014 (financial year-end)

25. 24
100x – The Indian Experience
47 enduring 100x stocks over 1994-2014
Note: Multiples are based on stocks being bought at the low price for the respective year,
and held on to Mar-2014.

26. 25
100x – The Indian Experience
100x in 12 years (47% CAGR); interim returns healthy
426
105 88
54 47
1-year 3-year 5-year 10-year 12-year
No. of years post purchase
100x portfolio: Avg returns from year of purchase (%) (Price multiple in boxes)
5x 9x 24x 74x 100x

27. 26
100x – Alchemy of SQGLP
S – Size
Q – Quality
G – Growth
L – Longevity
P – Price

28. 27
100x – Alchemy of SQGLP
S – Size
Small & relatively unknown (at the time of purchase)
 Small, both in Mkt Cap and Sales
— 47 stocks: Avg revenue Rs 300 cr, mcap Rs 250 cr
 Relatively unknown
— low institutional holding, analyst coverage, volumes

29. 28
100x – Alchemy of SQGLP
Q – Quality
High quality business X High quality management
 Quality business
— Large profit pool
— Value Migration (IT, Pharma, Private banking)
— Niche / Strategic opportunity (Eicher, GPPL)
— Dominant market share (Pidilite, United Spirits)
— Economic Moat (Bosch)
— Favourable demand-supply (especially for commodities)

30. 29
100x – Alchemy of SQGLP
Q – Quality
High quality business X High quality management
 Quality management
— Integrity
— Competence
— Growth mindset

31. 30
100x – Alchemy of SQGLP
G – Growth
Earnings Growth X Valuation Growth

32. 31
100x – Alchemy of SQGLP
Quality v/s Growth

33. 32
100x – Alchemy of SQGLP
L – Longevity
Longevity of quality & Longevity of growth
 Extend CAP (Competitive Advantage Period)
 Delay mean reversion of growth

34. 33
100x – Alchemy of SQGLP
P – Price
Favourable valuation
 Valuation growth lowers burden on Earnings growth for 100x
 Low P/E preferable; but not the only criterion
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 the right price –
absolutely none.
— Van Den Berg, Outstanding Investor Digest, April 2004

35. 34
100x – How to apply for future
Relatively objective criteria to hunt for
 Market cap < 3,000 crores ($0.5 billion)
 Likely beneficiary of Value Migration / Niche opportunity
 P/E less than 25x
IMPORTANT NOTE
 The companies mentioned here should not be construed as
our investment recommendations.
 Assessing quality of management is subjective, requires a
high level of due diligence, and not in the scope of this study.

36. 35
STATUTORY WARNING !!
 Investing blindly on others’ recommendation
may be highly injurious to wealth!

37. 36
100x – How to apply for future
Companies which meet the objective criteria for 100x
Company Small, unknown
(Mkt Cap, Rs cr)
Value Migration /
Niche opportunity
P/E
Aarti Drugs 10 Pharma exports 13
Suven Lifescience 22 Pharma exports 17
Granules India 16 Pharma exports 17
DCB Bank 29 Private banking 18
Tata Elxsi 19 Software exports 21
Shilpa Medicare 20 Oncology drugs research 24
Atul Auto 10 Niche 3-wheeler player 25

38. 37
Market Outlook
A macro perspective

39. 38
Corporate Profit to GDP is bottoming out at 4.3%
Market Outlook

40. 39
Interest rates still high, and are surely headed south
Market Outlook

41. 40
Market Cap to GDP reasonable at 77%
Market Outlook

42. 41
Sensex P/E at 16.4x is also in line with long-period average
Market Outlook

43. 42
 100x stocks are few. Finding them requires "vision to see,
courage to buy, and the patience to hold."
 Value Migration offers the most predictable 100x
opportunities.
 The 100x process is captured in SQGLP – Size, Quality, Growth,
Longevity and Price.
 "In evaluating a common stock, the management is 90%,
industry is 9%, and all other factors 1%."
 Quality does not guarantee growth, and in turn, rapid
long-term Wealth Creation.
 Subject to global factors, expect 50% upside in market
over 2 years as market cap moves towards GDP parity.
In Conclusion

44. Thank You !
&
Happy Investing For
100x !
IMPORTANT DISCLAIMER
• This study is primarily an analysis of economic data, company financials and stock prices.
• The companies mentioned here should not be construed as our investment
recommendations or opinions.