India's richest getting poorer

[Edevelop]

(Reuters) - India's richest are getting poorer, according to Forbes, as falling stock prices, corruption scandals in Asia's third-largest economy and a global slowdown wiped 20 percent off the total value of the country's 100 wealthiest in the last year.

Mukesh Ambani, head of Reliance Industries, India's most valuable company, retained the top spot with a value of $22.6 billion, despite seeing his net worth drop by $4.4 billion.

In the same period, Ambani completed construction of a 27-storey house in Mumbai, costing an estimated $1 billion.

The biggest loser in the list was Ambani's younger brother, Anil, whose net worth stood at $5.9 billion, down from $13.3 billion. His Reliance Group companies have been some of the worst performers on the Mumbai bourse this year.

A major drag for Ambani has been telecom firm Reliance Communications, which has $7.5 billion in debt and has so far failed in efforts to ease debt and raise money.

The combined wealth of India's richest 100 people fell to $241 billion in 2011, according to the Forbes India Rich List, which includes 57 dollar billionaires, a dozen less than a year earlier.

"This has been a turbulent year for India's richest," Naazneen Karmali, India Editor of Forbes Asia, said in a statement.

"Despite the economy growing at close to 8 percent, a spate of corruption scandals and rising inflation have taken a toll."

The world's second-fastest growing major economy after China grew only 7.7 percent in the three months to June, its weakest in 18 months, and Mumbai's benchmark stock index is down 16 percent since January.

India has raised its interest rates 13 times in 19 months, hurting demand for big-ticket items and making it more expensive for businesses to raise capital.

Of the 85 alumni from last year's list, 66 saw their worth drop this year. A net worth of $370 million was enough to make the 2011 list, down from $500 million a year ago.

BIG TEN

Mukesh Ambani lead a top ten dominated by industrial tycoons, including ArcelorMittal chairman Lakshmi Mittal, who came in second with a net worth of $19.2 billion.

Energy and metal barons Shashi and Ravi Ruia lie fourth with a combined worth of $10.2 billion.

Kumar Birla, head of the fabrics-to-cement Aditya Birla conglomerate, Adi Godrej of the Godrej Group and construction tycoon Pallonji Mistry -- the largest individual shareholder of the Tata Group and father-in-law to Noel Tata, touted as a likely successor to Ratan Tata -- are also in the top ten.

Many of those companies are benefiting from India's plans to spend $1 trillion in the five years to 2017 to overhaul its creaking infrastructure, seen as a barrier to continued economic growth.

Only one name from India's showpiece IT sector made the top ten: Azim Premji, chairman of Wipro, India's No. 3 software services provider, ranked third with a net worth of $13 billion.

Savitri Jindal, head of Jindal Steel and Power Ltd, was India's richest woman, sitting fifth on the list with a net worth of $9.5 billion. Jindal was one of only five women on the list of one hundred.

A $39 billion telecom scandal, likely India's largest ever graft scam, made its mark on the list, with two accused in the case, Vinod Goenka and Shahid Balwa, falling out of the top 100. Both deny any wrongdoing.

Debutants on the annual list include Kapil Bhatia and his son Rahul, founders of budget airline IndiGo, and V.G. Siddhartha, whose coffee shop chain Cafe Coffee Day gave him a net worth of $595 million.

India's biggest gainer in percentage terms was Brijmohan Lall Munjal, head of two-wheeler HeroMoto Corp, whose net worth rose to $2.7 billion in the year his firm ended a 26-year partnership with Japan's Honda Motor.

India's auto industry has seen car sales declining on high interest rates while families of four continue to buy two-wheelers, most of which can be bought without relying on loans.

India's richest getting poorer, says Forbes | Reuters

 

[SpArK]

Stock prices have been going down drastically in tandem with other asian markets.

Even the Muharat trading yesterday was dull and not much movement to sensex.

Hope November will bring back the stock to its real prices.

And those who have bought november futures and options are going to get richer for sure.. ( pray for it .. i got plenty in nov furures .. waiting for market opening).

 

[ramu]

Building India Inc

A weak state has given rise to a new kind of economy. Without reform, it will hit limits

WITH the Western way of doing things under siege, India’s rise offers a dollop of reassurance to anyone who believes in the combination of democracy and capitalism. It is a superpower-in-waiting whose people vote, whose society is raucous, and whose firms are red-blooded and striding onto the world stage. The contrast with China’s authoritarian capitalism is one that fans of laissez-faire find comforting. Some see an echo of America’s freewheeling approach, with spicier food and worse roads. But that view is a delusion, as our special report explains. For while India’s capitalism does have oodles of vim, it is writing its own rules, some better than others.

Mumbai, as seen from Mars

Some Indian firms have, admittedly, followed an American-style fairy tale. Infosys, a technology firm, leapt in a generation from a start-up to a global blue chip, owned by institutional shareholders and measured against that most Western of yardsticks, the stock price. Yet this is the exception, not the norm. A Martian investor landing on Mumbai’s streets of gold might judge its business scene a mix of São Paulo, Seoul and Shanghai, with only a dash of Silicon Valley.

In Western economies well over half of stockmarket profits are from firms controlled by institutional investors; in India only an eighth are. Instead capitalism is skewed towards the state and business houses (conglomerates usually controlled by families and family trusts). Government—grumpy, doddery and sometimes bent—still looms large. State-backed firms, similar to China’s, make 40% of stockmarket profits and dominate energy and finance. A vast number of other public-sector entities, some of them decrepit, often create bottlenecks. These are the remnants of India’s Fabian nightmare.

India Inc’s newer companies rose after a burst of liberalisation back in 1991. In its wake foreign firms piled into industries such as consumer goods and carmaking, drawn by a big pool of labour and customers. Between 1995 and 2003 superb new local entrepreneurs made fortunes in the sunrise industries of telecoms, air travel, technology and health care.

The revolution also hit the traditional business houses. Many flabby outfits declined. Yet plenty fought back, becoming much more professional outfits. Thus alongside stars born in the 1990s, such as Bharti Airtel, a mobile-phone firm, older conglomerates such as Reliance Industries, Aditya Birla and Tata Sons still loom large in the Indian mind, their extraordinarily diverse output driven, eaten, worn and watched, their hereditary bosses as famous as film stars. Though mid-sized by global standards, they have entered the consciousness of foreigners too, with takeovers abroad, from Novelis, an aluminium outfit, to Corus, a steel company. The next rank down of business houses, such as Mahindra, are now going global too. India is exporting a corporate form which owes as much to South Korea’s chaebol, Japan’s keiretsu and Brazil’s barons as it does to a current American or European ideal of the firm.

Perhaps India is just at an earlier chapter of the Western script. In 1900 American industry was dominated by tycoons such as John Pierpont Morgan and John D. Rockefeller. Now, thanks to the need to raise capital from outsiders, antitrust probes and the absence or flaws of heirs, the remnants of their empires are dismembered and answerable to fund managers—as Microsoft and Apple already are.

Still, by that yardstick Indian firms have decades before institutional capitalism takes over. And their approach of being widely spread and tightly owned has lots of puff left. After the ructions of the 1990s the share of activity from family-linked firms has been stable for a decade. The few firms controlled by diffuse owners often bin their MBA textbooks and run as conglomerates too. First-generation entrepreneurs who made it in the 1995-2003 sunrise era are diversifying their groups and teaching the kids to take over. And although the biggest group, Tata, will move beyond its family when its heirless fifth-generation patriarch retires in 2012, it is in no hurry to break itself up.

This suggests there is in fact a logic to India’s favourite way of organising firms. It makes sense for businesses to sprawl because the Indian state is still pathetically weak. Infrastructure is so awful that companies often build their own. Courts are slow and sometimes corrupt, so contracts are hard to enforce and banks and businesspeople are inclined to stick with companies they know and trust. Established business houses can use their muscle to expand into new areas, sometimes at the expense of newcomers. Fewer new firms have broken into the big league since 2003 and those that have done so have tended to be good at working the political machine.

Capitalism for a billion, not just billionaires

All this might seem a recipe for disaster. In Korea and Japan closely held and widely spread firms became slothful. So far India Inc has been different: its big business houses compete and innovate fiercely. Their returns on capital are neither pathetic nor outrageous and most are prepared to invest billions of dollars in the risky capital projects that India needs so badly.

The danger is that over time, without another bout of reform, sclerosis will set in. India’s firms mostly thrive in spite of the weak state; they need to make sure they do not thrive because of it. Already there are two worrying signs: the slowdown in new entrepreneurs breaking into the established order; and endemic corruption. Both clash with the aspirations of the masses, who want India to be a land of opportunity. The current popular fury against graft is aimed at politicians, but India’s oligarchs have often been on the other side of the deal and may be next in line to get a roasting.

Few dispute the uselessness of much of the state and the need for an Indian Deng Xiaoping or Margaret Thatcher to roll it back. Whether that reformer arrives soon to deliver better infrastructure, swifter justice and good governance is less clear. But businesses can still do their bit by cleaning up their act, loudly supporting reform and improving their own governance, which is often murky. India Inc has a huge amount to be proud of. Now it needs to venture into the unknown.

Business in India: Building India Inc | The Economist

 

[harpoon]

I think its a global phenomenon. Share markets in every continents are suffering.

 

[JishanKKK]

logic is simple....when rich gets poor than poor gets rich....it makes a equilibrium.

 

[T90TankGuy]

logic is simple....when rich gets poor than poor gets rich....it makes a equilibrium.

never heard of that !!! could you expand on your statement?

 

[SpArK]

never heard of that !!! could you expand on your statement?

Newton's Third Law.

 

[rcrmj]

india's economy is hijacked by foreign institutional investment funds, they never had an intension of long term investment as the awfaul economical and social environment india has, and more sadly their government shows no signs of competence to address any of them```so since india has quite open stock market, IF pouring in hot money when the global market is stable, but in the event of turbulence, India financial market will suffer more than those developed and manufacturing countries.

 

[rai_kamal]

india's economy is hijacked by foreign institutional investment funds, they never had an intension of long term investment as the awfaul economical and social environment india has, and more sadly their government shows no signs of competence to address any of them```so since india has quite open stock market, IF pouring in hot money when the global market is stable, but in the event of turbulence, India financial market will suffer more than those developed and manufacturing countries.

Almost correct.

 

[T90TankGuy]

Newton's Third Law.

spark newtons third law could hardly be applied to this scenario.

 

[karan.1970]

spark newtons third law could hardly be applied to this scenario.

More like law of conservation of Capital ... Or as they say.. Zero sum game..

 

[SpArK]

spark newtons third law could hardly be applied to this scenario.

That explains why i am not good in biology... or is it physics... or metallurgy.. or astrology..whatever...

 

[T90TankGuy]

india's economy is hijacked by foreign institutional investment funds, they never had an intension of long term investment as the awfaul economical and social environment india has, and more sadly their government shows no signs of competence to address any of them```so since india has quite open stock market, IF pouring in hot money when the global market is stable, but in the event of turbulence, India financial market will suffer more than those developed and manufacturing countries.

true to a certain extent . but its a risk you take in an open market . that what business is about . we cant be protected every time . through risks come gains.

 

[rcrmj]

true to a certain extent . but its a risk you take in an open market . that what business is about . we cant be protected every time . through risks come gains.

as a developing market your government should address some protectionism methods to regulate the hot money, foreign IF has no intension to develop India's economy but pure speculation on the market.

 

[T90TankGuy]

as a developing market your government should address some protectionism methods to regulate the hot money, foreign IF has no intension to develop India's economy but pure speculation on the market.

it is quiet true . but we do it all the time . its a risk you take , when stepping into the business world. we are not like other countries who say they have a free economy but enforce stringent protectionist measures if they are an trouble.