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.
Given Arun’s addiction for data and stats I wasn’t surprised when he asked me dig in and find out the long term returns of Infosys. 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) (thnkx Sandeep for correction)
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.
I am reminded of the famous dialogue from the movie “Guru” which roughly translated means,
“Do you want me to become the biggest company of the world”
This is symbolic with how the Stock market investments should be seen as. Buy shares to buy a stake in the company and not to make quick profits from it.
What say? Are you one of the lucky few to have made their millions from Infosys or you have your own stock market riches story to share.
[This post has been written by our regular contributor Ankit Agarwal, an ERP Consultant by profession, a wannabe entrepreneur and stock market stalker by passion]