M&M sees biggest gain in shareholder wealth

The combined market capitalization of the Mahindra and Mahindra Group gained by 210% to Rs42,845.96 crore on Wednesday, from Rs13,809.02 crore on 31 December

Auto-to-software group Mahindra and Mahindra Ltd, run by the uncle-nephew duo of Keshub and Anand Mahindra, has emerged the biggest gainer in market capitalization in calendar year 2009 among India’s top business conglomerates.

Market capitalization is arrived at by multiplying the share price and the number of shares outstanding. Sandeep Bhatnagar / Mint

The combined market capitalization of the Mahindra and Mahindra Group gained by 210% to Rs42,845.96 crore on Wednesday, from Rs13,809.02 crore on 31 December.

During this period, Sensex, India’s 30-stock benchmark equity index, rose 60.32%. Mahindra and Mahindra, the group’s flagship company, is part of the Sensex with a 1.44% weight.

Market capitalization is arrived at by multiplying the share price and the number of shares outstanding. It provides a total value for the company’s shares and thus for the company as a whole.

Mint’s analysis of market capitalization took two sets of timelines into consideration. The first looks at the appreciation in market capitalization from the beginning of the calendar year to 10 June and the second tracks the effect of market capitalization on business groups since the election results on 16 May.

Since January, many Indian business groups, including public sector enterprises, have regained a large portion of the shareholder wealth they had lost following a sharp drop in the Sensex after touching a lifetime high of 21,206.77 points in mid-January 2008.

A study of the share price movements of the group companies of big industrial conglomerates since 15 May, ahead of the Sensex’s 2,100-point leap, shows that public sector enterprises were among the biggest beneficiaries of the market re-rating after the Congress-led United Progressive Alliance government came back to power with a comfortable majority.

Market capitalization of public sector enterprises appreciated 42.84% to Rs16 trillion from Rs11 trillion between 15 May and 5 June. There are around 70 listed public sector enterprises. The government’s stake in these companies varies between 20.18% and 99.59%.

The trigger for the appreciation in value for public sector enterprises stocks could be attributed to the President’s speech in the new Lok Sabha. President Pratibha Patil spoke about the right of Indian citizens to own a part of the shares in public sector undertakings, even as the government retained majority control in public sector enterprises.

“My government will develop a road map for listing and people-ownership of public sector undertakings while ensuring that government equity does not fall below 51%,” she said, outlining the agenda of the new government.

Prime Minister Manmohan Singh in his reply to the debate on the President’s speech in both houses of Parliament, made a strong pitch for divestment to raise resources for social programmes.