India’s golden dozen

It’s not that these dozen billionaires have suddenly emerged from the shadows. Way back in 2000, riding the tech boom, India had as many as nine billionaires in the Forbes list. The number fell to four the next year when the market crashed but since then it has steadily risen to five in 2002, seven in 2003, nine in 2004, and 12 now. The other interesting development has been that it is only now, in 2005, that the combined wealth of India’s billionaires has surpassed the 2000 figure of $28.3 billion — it had fallen the very next year to $14.2 billion and grown only marginally since then. Between 2004 and 2005, the wealth of Indian billionaires has seen a spectacular 2.4 fold jump.

Mittal’s $25 billion has led this jump — it adds up to 40 per cent of the total wealth. In addition to owning the world’s largest steel company, Mittal Steel, he merged Ispat International with International Steel Group three months ago. With a huge steel empire, riding the turn in steel prices in particular and commodities in general, Mittal has seen his wealth rise by four times since 2004. Compared to him, the otherwise formidable 55 per cent growth in the wealth of Azim Premji looks just ordinary. In fact, Premji, who had been ruling the India billionaire roost since 2000 and has risen 20 places from 58 to 38 this year, couldn’t match Mittal’s metals manoeuvres.

Without exception, all the 12 billionaires in the list derive their wealth from stock markets. Be they self-made entrepreneurs like the telecom upstart, Sunil Mittal (Rank 164, worth $3.3 billion), and travel agent-turned-airline-skylord Naresh Goyal (Rank 437, worth $1.5 billion), or mega inheritors like commodities conglomerate Aditya Birla Group’s heir and the youngest Indian billionaire Kumar Managalam Birla (Rank 149, worth $3.7 billion) and construction successor Pallonji Mistry (Rank 170, worth $3.2 billion), most of their wealth comes from the value of their listed companies.

In Mistry’s case, it is his 18.4 per cent holding in Tata Sons, of which the market capitalisation of flagship TCS alone is around $15 billion; Premji owns four-fifths of Wipro; Dilip Shanghvi (Rank 437, worth $1.5 billion) owns 72 per cent of Sun Pharmaceuticals; most of Mukesh and Anil Ambani’s (Rank 60, worth $7 billion) wealth comes from their holdings in Reliance. Clearly, the marriage of enterprise and equity is pretty and profitable.

But I believe, this list is incomplete. Forbes’s methodology only takes listed companies (or unlisted companies discounted by a price to earnings multiple for similar companies). Which means, any wealth beyond company ownership is not factored in. In India, a disproportional allocation of wealth goes into real estate and gold. Factor in the real estate ownership of Indians and the list of Indians in the list will explode — particularly this year, when there has been a dramatic re-rating of real estate, with prices rising between two and 10 times. Caution: most of this money could well be outside the purview of law.

I also believe that the Forbes list will have many more Indian billionaires in future. It is getting increasingly difficult to create wealth outside the law — bribing bankers to lend money, rigging balance sheets to show higher profits, manipulating stock prices to get a premium valuation, is not easy any more. There is a whole new industry of analysts, researchers, professional investors and FIIs influencing markets today. What they are saying is: we like the India story, so clean up your act, work hard and create wealth for yourself — and us. Here’s the money to do all that.

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