A 20-year marathon for 9 sensex players

When the economic reforms were unleashed in July 1991, the BSE Sensex was composed of 30 prominent companies of that time. Two decades later, the question that comes to mind is whether any of those ‘grandfather’ companies are still on the current index. The answer may surprise you. Not one but nine companies in the original July 1991 list still figure in today’s Sensex.
Call them marathon runners or the shining beacons of liberalisation that have also stood the test of the market. These nine firms -- Aditya Birla group’s Hindalco, India’s largest FMCG firm Hindustan Unilever, cigarette-to-hotels giant ITC, engineering major Larsen & Toubro, diversified group Mahindra & Mahindra and India’s largest private sector company Reliance Industries besides Tata Power, Tata Motors and Tata Steel — today represent Rs 8,40,000 crore of investor wealth.
That’s 30 per cent of the entire wealth of all Sensex constituents! Rs 100 invested in ITC 20 years ago, for example, would be worth Rs 14,000 today. Another Rs 100 put into Larsen & Toubro would have become Rs 6,330 while the same in Reliance Industries would be worth not less than Rs 4,571.
In recent years, however, the returns from these nine companies have not been up to the mark. The average three-year return given by the nine firms on July 21 was 36 per cent. The 21 companies of July 1991 Sensex that are not in today's index have, surprisingly, given better returns to investors. The average three-year return of 20 of these 21 companies that are still listed is 60 per cent.
But such has been the prowess of some of the nine veteran firms that the Sensex has never been constituted without them! Six of them -- Hindalco, Hindustan Unilever, ITC, Reliance Industries, Tata Motors and Tata Steel -- have always been present in the benchmark index in the past 20 years. It is sheer bad luck that Larsen & Toubro, which was shunted out for just four months in 2004, doesn’t boast of an unblemished record. On the other hand, Tata Power and Mahindra & Mahindra have spent an identical 14 and a half years in Sensex since July 1991 with M&M being absent from the index between January 2002 and June 2007 while Tata Power re-entered the index twice.
But amid the celebrations, spare a thought for the 21 names that are missing from the 1991 Sensex list. While the economy grew and so did the children of reforms, as some would like to call India Inc, companies such as ACC, Ballarpur Industries, Bombay Dyeing, Ceat Tyres, Century Textiles & Industries, Cummins India (then Kirloskar Cummins), GE Shipping, GlaxoSmithKline Pharma, Grasim Industries, Gujarat State Fertilisers & Chemicals, Hindustan Motors, Indian Hotels, Indian Organic Chemicals, Indian Rayon & Industries, Mukand Iron & Steel, Nestle India, Philips Electricals Company (India), Premier Automobiles, Siemens, Voltas and Zenith slowly went out of Sensex. With the exception of Philips Electricals Company (India) they are all still listed but a few have undergone name changes and major restructuring.

Source - Kumar Shankar Roy
FC Research Bureau