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Business Houses Go Bust

Business houses have been affected by the market meltdown as well & have posted unimpressive numbers of late

We decided to take an aggregate view of India’s top business groups by combining the market capitalization of their group companies at their peak (January 10, 2008) and at their bottom (October 24, 2008) to gain an insight into the performances of these house. Since January 2008, things have not been in the best shape, profitability has taken an about turn, capex plans are being deferred, companies are finding it difficult to honour their commitments made on the peak of the business cycles (read, M&As) and all of this coupled with below average second quarter results and bleak future guidance has resulted in the perfect recipe of disaster.

To begin, Bajaj family’s combined market cap of all companies declined by 84.56 per cent. Among the companies, Bajaj Hindustan lost most, with a decline of almost 88.16 per cent in its market cap.

Next in line is the buccaneer entrepreneur Anil Ambani and his group of companies. Adlabs was his worst performer, with a fall of 89.50 per cent. Adlab’s m-cap went down to Rs 726.95 crore on October 24, from a high of Rs 6,857.10 in January.

Anil’s big brother Mukesh Ambani was less affected as his group companies, namely Reliance Industries, Reliance Petroleum and Reliance Industrial Infrastructure registered a combined a drop of 64 per cent. The market cap at the peak was Rs 5,41,864.41 crore and at the bottom it was Rs 1,95,020.41 crore. Reliance Industrial Infrastructure saw the biggest decline in value.

The Aditya Vikram Birla group, spearheaded by Kumar Mangalam Birla, is battling with bad times as well. Needless to say, that the current downturn has sliced approximately 70 per cent of the market cap of his group companies. Furthermore, the group is finding it difficult to repay the amount for its (Hindalco’s) Novelis acquisition. The worst to suffer is Shree Digvijay Cement, which lost 86 per cent of its value since January.

The BRT Mishap!
Business House   Market Cap    % change
  10-Jan-08  24-Oct-08  
Bajaj Group (10) 36152 12271 -66.56
Birla Aditya Group (9) 126039 37334 -70.38
Reliance [Anil Ambani] (5) 330735 71509 -78.38
Reliance [Mukesh Ambani] (3) 541864 195020 -64.01
Tata Group (26) 297804 116476 -60.89
Source: CMIE, Rs cr, figures in bracket are no. of companies listed on BSE

And lastly, the Tata Group, with the maximum number of listed companies (26), has suffered too. Tata Motors, Ratan Tata’s flagship company, is struggling to raise funds for its Jaguar-Land Rover acquisition worth $6 billion. Tata Motors was unable to cover its $850 million rights issues after fall in share price below the offer price. As far as the fall in value is concerned, it was 61 per cent from the peak m-cap of Rs 2,97,804.03 crore as on January 10, 2008 to Rs 1,16,476.23 as on October 24, 2008.

Times are tough, irrespective of whether it is a promoter or an investor and we all have to sail through it together. After a point, it makes no difference who wins or loses the war because everyone has lost a lot in the smaller battles.