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Brothers Ashok (left) and Srichand Hinduja of the Hinduja Group which saw the biggest wealth erosion in March compared to a 20% decline registered by benchmark indices during the same period. (AFP)
Brothers Ashok (left) and Srichand Hinduja of the Hinduja Group which saw the biggest wealth erosion in March compared to a 20% decline registered by benchmark indices during the same period. (AFP)

Hindujas shed most wealth in market rout amid virus fears

  • Market valuation of Hinduja firms falls 67.27% followed by Bajaj companies at 42.59%, M&M at 36.76%
  • Tata Chemicals was the biggest individual loser with 70.35% lost till 25 March

MUMBAI : The wave of selling since pandemic fears struck in March have eroded trillions of investor wealth for India’s biggest conglomerates. Among India’s 10 most valued business groups with cumulative market valuation, the Hinduja Group has seen the biggest wealth erosion of more than 67% in March, while benchmark indices have lost 20%.

Markets worldwide have fallen steeply in March as Covid-19 spread, infecting hundreds of thousands across continents.

The combined market valuation of all listed Hinduja Group companies has fallen 67.27%, followed by the Bajaj group (42.59%), Mahindra group (36.76%), and L&T group (33%), according to Bloomberg data till 25 March. Among individual companies, Tata Chemicals lost 70.35% in this period, the biggest individual loser.

The Tata group lost 18.70%, Mukesh Ambani-led Reliance group (18.84%), Anil Agarwal-led Vedanta (28.67%), and JSW Group (33.63%). Among financials, HDFC group lost 26.21%.

Among the top 10 most valued companies, Tata Consultancy Services has lost 12.43%, Reliance Industries Ltd 18.62%, Hindustan Unilever Ltd 4.51%, HDFC Bank 27.33%, and ITC 25.43%. In comparison, there are close to 97 listed government entities in the country, including 85 central public sector enterprises and 12 public sector banks. Among government-owned companies, PNB Housing has lost the most in this period (down 58.55%) followed by Dredging Corp., MSTC and the Indian Railway Catering and Tourism Corp., which have lost 50-54%. Among government companies, Coal India, one of the most valued companies, lost 26%, while SBI was down 37.30%.

The stocks that led the rally before the peak are the ones that fell the most, said ICICI Securities.

“The current sharp sell-offs have not broken the evolving construct of the market since 2010, with quality continuing to outperform. This has resulted in the price-to-book and return on equity line shifting towards the right while continuing to remain steeper than the average of the past decade," it said. Though benchmark indices have gained in the last three trading sessions, analysts said the 21-day nationwide lockdown and the consequent decline in discretionary spending will aggravate the downturn in the April-June period. The ongoing lockdown is bringing manufacturing and services to a grinding halt and disrupting domestic supplies, and the services sector is expected to be hit particularly hard. There is a risk of long-term loss of demand and capacity in both industrial and services sectors, if the crisis prolongs, analysts said.

The adverse effects of Covid-19 on several sectors are already visible, as most companies have shut their plants and, wherever possible, are allowing employees to work from home. According to Motilal Oswal Financial Services estimates, only 30-40% of the economy is currently operational at different intensities.

“A sensitivity analysis of the adverse impact of the lockdown suggests that a single day of complete lockdown could shave off 14-19 basis points (bps) and 55-75bps from annual and quarterly growth respectively," the brokerage firm said. According to analysts at Motilal Oswal Financial Services, 20% of the economy (manufacturing, hotels and restaurants, water, air transport) is severely affected at this stage. Around half (48%) of the economy agriculture, construction, railways, business services, education and other services) is moderately affected and the remaining 32% is only mildly affected at this stage.

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