20TH ANNUAL WEALTH CREATION STUDY By Motilal Oswal

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 for the past 19 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, after adjusting for equity dilution.

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). The biggest Wealth Creators are listed in Appendix I (pages 44-45) and the fastest in Appendix II (pages 46-47).

The table below shows companies which missed out on the top 100 Wealth Creators list due to their stock underperforming the Sensex.

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