Case Study: How investment in 100 shares of WIPRO grew to be over Rs 3.28 crores in 27 years?
Indian stock market is filled with the examples of amazing stocks which has created enough wealth for its loyal shareholders to live a long happy life. Last week, we discussed one such stock- the case study of Infosys.
In this post, we are going to discuss the case study of WIPRO- an Indian information technology giant company owned by Azim Premji.
WIPRO Wealth Creation Story:
Assume you bought 100 shares of WIPRO in 1990. At that time, the face value of one stock of WIPRO was Rs 10. For simplicity, we are considering that you bought the stocks at the face value. Hence, your initial investment would have been Rs 1,000.
(Note: Stocks in the Indian stock market rarely trade below their face value. Most of the shares trade at a high premium compared to their face value. However, there has been a number of adjustment in the share price of the company since 1990 because of various bonuses and stock split. Therefore, just for simplicity, we are considering that you purchased the stock at the face value. Moreover, when you compare the appreciated value with the purchase price, you’ll understand that it wouldn’t have made much difference even if you had bought this stock at a little premium.)
Since 1990, WIPRO has given seven bonuses to its shareholders and one stock split (till 2017). Let’s also assume that you didn’t touch the stock after buying. This means that you didn’t sell any stock since the purchase and also avoided any profit booking.
Now, let us analyze the bonuses and stock split of WIPRO for past 27 years.
- 1990: 100 shares
- 1992: 200 shares (1:1 bonus on 12-08-1992)
- 1995: 400 shares (1:1 bonus on 24-02-1995)
- 1997: 1,200 shares (2:1 bonus on 20-10-1997)
- 1999: 6,000 shares (5:1 split on 27-09-1999)
- 2004: 18,000 shares (2:1 bonus on 25-06-2004)
- 2005: 36,000 shares (1:1 bonus on 22-08-2005)
- 2010: 60,000 shares (2:3 bonus on 15-06-2010)
- 2017: 1,20,000 shares (1:1 bonus on 13-06-2017)
(Source: Money Control)
In short, 100 shares of WIPRO bought in 1990 would have turned out to be 1,20,000 share by 2017.
Also read: Stock split vs bonus share – Basics of stock market
Capital Appreciation:
Let’s find out the current worth of the 100 shares that you bought in 1990.
As of May 2018, the market price of one share of Wipro is Rs 273.75
Total Number of share= 1,20,000
Net Value = Rs 273.75 * 1,20,000 = Rs 3,28,50,000.
The net appreciated value would be worth over 3.28 crores.
Your small investment in the 100 shares of WIPRO in 1990 would have turned out to be worth over 3.28 crores in next 27 years.
Don’t forget the dividends…
In the last 27 years, WIPRO has given a decent annual dividend to its shareholders. However, here we are just considering the dividends for the last four years.
Annual dividend per share by WIPRO for last 4 years–
- 2014: Rs 8.00
- 2015: Rs 12.00
- 2016: Rs 6.00
- 2017: Rs 4.00
Annual dividend received by the shareholders can be calculated using this formula:
Annual dividend received= Dividend per share * Total Number of shares
Assuming that you bought 100 shares of WIPRO in 1990, here are the annual dividends that you would have received:
- Dividends (2014) = Rs 8 * 60,000 = Rs 4,80,000
- Dividends (2015) = Rs 12 * 60,000 = Rs 7,20,000
- And Dividends (2016) = Rs 6 * 60,000 = Rs 3,60,000
Moreover, for the year 2017, the total number of shares in your portfolio would have turned out to be 1,20,000.
Dividends (2017) = Rs 4 * 1,20,000 = Rs 4,80,000
Overall, you would have received dividends worth Rs 4,80,000 in just an year by literally doing nothing.
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The best part…
Even if you don’t sell your stocks, you are holding a total of 1,20,000 shares in your portfolio and hence are eligible to get dividends on all those shares.
Moreover, dividends increase over time. If the company announces a bigger dividend next year, you will receive even a bigger passive income through dividends. In addition, if the company announces any bonuses in future, even your grandchildren lives can be considered as secured 🙂 (kidding!!).
Also read: How ‘Not’ to Kill The Goose That Lays the Golden Eggs?
Conclusion:
Time and again, the stock market has proved that the long-term investment is the real strategy to create huge wealth.
WIPRO is just an example. There are a number of companies in the Indian stock market which has given even a better return compared to WIPRO. For example- Eicher Motors, MRF, Symphony, Page Industries etc. Although it’s little difficult to hold a stock for such long-term and not to book any profit. However, if you are a conservative investor with good patience level, then you can definitely receive amazing returns from your investments.
In the end, here’s a quote by Warren Buffett:
“Our favorite holding period is forever.”
Kritesh (Tweet here) is the Founder & CEO of Trade Brains & FinGrad. He is an NSE Certified Equity Fundamental Analyst with +7 Years of Experience in Share Market Investing. Kritesh frequently writes about Share Market Investing and IPOs and publishes his personal insights on the market.
