Creating shareholder value is a good thing
This morning I would like to talk about the merits of creating shareholder value in a market-based economy. I will take two examples: the Ambanis and the Tatas.
In Reliance Industries (RIL)—
Shareholding:
Promoter & Promoter Group (Ambani family + trusts + holding companies): ~50.4%
Public shareholders (institutions, retail, FIIs, etc.): ~49.6%
The market capitalization of Reliance is about Rs 20 trillion.
Thus, a little less than Rs 10 trillion shareholder value is possessed by 47.65 lakh shareholders
The Tata Group is effectively controlled by philanthropic trusts.
Dividends from Tata Sons flow into the Tata Trusts, which fund large-scale initiatives in health, education, and community development.
This makes Tata one of the rare global conglomerates where philanthropy, not private wealth accumulation, is the controlling principle. In many companies it holds less than 50% of shares. The combined market capitalization of the listed companies of the Tata Group is about Rs 27.3 trillion.
Some discredited and disgruntled journalists and retired, unemployed bureaucrats who do not understand either markets or finance rail against Tatas, Ambanis and indeed other business groups with the clichéd “rich getting richer, poor getting poorer” narrative.
Truth be told, as Indian companies and groups prosper, the growing Indian middle-class is benefiting from the creation of shareholder value.
Category: Business