5 companies that have destroyed wealth of investors in past

India’s stock benchmarks — Sensex and Nifty — have returned 12 percent in the last years and Nifty 50  returned 52% percent in the last 5 years thanks to the resilience of a few blue chips. But a study of stock performances beneath the surface shows the extent of investor wealth destruction in the past years. Many companies such as Cox & Kings, McLeod Russel India, Reliance ADAG companies, Dewan Housing Finance, Indiabulls Housing Finance, Jet Airways (India), Reliance power, among others have lost 78-99 percent in value, making them the biggest wealth destroyers in this period.

Just Dial has been one of the biggest wealth destroyers in the last 5 years. The stock, which was trading at around Rs 1,600 in July 2014, has fallen over 50 percent to around Rs 470 per share currently.

To put it into perspective, an investment of Rs 1 lakh in 2014 would have reduced to Rs 25,000 in 2020.

The stock declines have been mostly on account of investor aversion to companies with high debt and corporate governance problems “Any stock which has lost money, not only over the last year but over a period of time, has seen poor governance and situations where business models didn’t exist,” said Nilesh Shah, managing director at Kotak Mahindra Asset Management Company.

The small-cap index is down 7.5 percent, while the midcap index has declined 1.2 percent during this period.

“Businesses will have swings but if governance and ethics of the promoter don’t sustain then nothing can protect the company. In some sense excess debt is also a function of governance as many projects were gold plated,” said Shah.

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