Many investors believe in the power of long-term investing. There have been many stocks that have given multibagger returns to their investors and have made fortunes for them. One such stock is of a chemical company SRF Ltd.
One of the most common ways by which a stock has given multibagger returns is by appreciation in share price. But corporate actions like bonus issues are one of the most underrated ways of making massive profits.
SRF Ltd is a chemical-based multi-business entity engaged in the manufacturing of industrial as well as specialty chemicals. Its portfolio of products includes fluorochemicals, specialty chemicals, packaging films, technical textiles and coated and laminated fabrics.
According to the company’s annual reports from 15 years ago (2008 March), its shares were trading at ₹ 100 levels. Let’s say that an investor invested ₹ 1 lakh in the company’s shares at that time. They would have received (₹ 1,00,000/100) 1,000 shares.
A few years later, in 2021, SRF announced a bonus in the ratio of 4:1. This means that shareholders received four bonus equity shares for every share that they held. In the above example, the shareholder will have 1000 equity shares plus 4000 bonus equity shares. Therefore, they will have 5000 shares.
The company’s shares closed at ₹ 2271.95 apiece on Friday. Therefore, the shareholder’s holdings are worth ₹ 1,13,59,750 (₹1.13 crores), i.e., ₹5,000 X ₹2271.95. This means that SRF’s shares have given multibagger returns of a whopping 11260% in the past 15 years.
Please note that the share price shown on various platforms is an adjusted share price after taking into account all corporate actions of the company. Considering that price for calculation will give an inaccurate picture of the returns that a shareholder will receive. Whenever a corporate action like a bonus or split takes place, a company’s past share price is adjusted according to the ratio of that action.
Written by Simran Bafna
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