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How an investment of Rs.10000 grew to Rs.535 Crores in 34 years

Buy a demat account ,Invest in a blue chip stocks and become billionaire.

If I had the technology to send a message back in time, I would tell my father in 1980 to “Use Rs.10,000 to buy 100 shares of Wipro as an one-time investment and never sell it for the next 30-35 years.” If he had done that his investment would now be worth about Rs.535 crores. Yes, you read that right. Crores, not thousands or lakhs.

This is one of the common examples given when people come into investing in shares in India. Almost every indian blog about investing in stock markets give this example and I also post this here as requested by a reader. Lot of people think that it is a lie and don’t believe it, but it is possible and there are numbers to prove it.

Rs.10,000 to Rs.535 Crores

Lets just assume that you bought 100 shares of Wipro each at a face value of Rs.100 in the year 1980. Total investment: Rs.10,000. You don’t touch it at all, no profit booking or buying more shares. Occasionally companies provide benefits to its shareholders by way of corporate actions. They could provide bonus shares for shares that you hold, they could do a stock split where a high face value share would be broken down into smaller face value shares but number of shares increases proportionately, etc.

Wipro has done various such bonuses and stock splits in its history of 1980-2014. Lets now see the different corporate actions and how the number of stocks would’ve grown.

Wipro Investment growth

Year Action Number of Shares
1980 Initial Investment 100
1981 1:1 Bonus 200
1985 1:1 Bonus 400
1986 Stock split to FV Rs.10 4,000
1987 1:1 Bonus 8,000
1989 1:1 Bonus 16,000
1992 1:1 Bonus 32,000
1995 1:1 Bonus 64,000
1997 2:1 Bonus 1,92,000
1999 Stock split to FV Rs.2 9,60,000
2004 2:1 Bonus 28,80,000
2005 1:1 Bonus 57,60,000
2010 2:3 Bonus 96,00,000

After the year 2010, there were no more bonuses or stock splits. But with just that initial investment of Rs.10,000 (100 shares) you now would end up with 96,00,000 shares of the company because of all the stock splits and bonus shares. Current stock price of Wipro is about Rs.557 per share, as of 7 April, 2014.

artical about buying a demat account and buy share

Infosys – The IT bellwether was instrumental in putting Indian IT prowess on the global map. Mr. Narayana Murthy, a first generation entrepreneur executed his dream to perfection. Today, the multi-billion dollar company gives you no idea that it originated in a dinky garage.

The last post on Why Warren Buffet Makes money and you don’t garnered great discussions and conversations, and most of the discussion stemmed from the fact that Long Term Investment is the key to any successful portfolio.

The company has been in the stock market for long and I was sure that the returns would be amazing. But boy was I stunned or what !

The capital appreciation via Infosys shares is out of this world. But, let’s go down the history lane to find out how it all originated

  • In 1982, Infosys opened an office in Bangalore which soon became its headquarters.
  • Infosys made an initial public offer at Rs. 95 a share in February 1993 and was listed on stock exchanges in India in June 1993
  • Interestingly, Infosys IPO was undersubscribed but Morgan Stanley bailed it put by picking up 13% of equity at the offer price of Rs. 95 per share.
  • The trading opened at Rs.145 a share, almost a 60% premium on the day of listing.
  • The share price surged to Rs. 8,100 by 1999 making it the costliest share on the market at the time. 6 years and the share multiplied 85 times
  • According to Forbes magazine, since listing on the Bombay Stock Exchange till the year 2000,Infosys’ sales and earnings compounded at more than 70% a year.

Your head spinning as yet!! Wait before I tell you the numbers that are hair raising.

Infosys is currently trading at Rs. 2228 (NSE) – which is close 23 times of its IPO price – But more than that it has given handsome dividends quarter on quarter. And don’t forget the bonuses and splits that this share has gone through.

Infosys Stock Bonuses Splits since IPO:

Fiscal Bonus share issue Stock split ratio
1986 1:1 2 for 1
1989 1:1 2 for 1
1991 1:1 2 for 1
1992 1:1 2 for 1
1994 1:1 2 for 1
1997 1:1 2 for 1
1999 1:1 2 for 1
2000 2 for 1
2004 3:1 4 for 1
2006 1:1 2 for 1

Here is what you would have if you had 100 share in 1993 at IPO bought at Rs. 95 /-

  • Your Total investment in Infosys in 1993 -Rs. 9,500/- (100 shares at Rs. 95)
  • Your Total investment in Infosys as of today (2009)– 28,51,8400/- (12800 shares at 2228)

If you had invested Rs. 9500 in Infosys in 1993, today you would be sitting on more than 30 crores 3 crores (including dividends around 50 lakh)

I sure was too small to buy during the IPO stage, but then I am not going to miss out this time. Even though I don’t track IT stocks, writing this post made me realize that Company Fundamentals and Management capability of Infosys makes it worthwhile to study the stock further to understand the Intrinsic value at the current price.

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