THE POWER OF COMPOUNDING

HI Friends!! Many a times we have heard about the power of compounding, we have also learnt some of them too….but the things we learn from practical life can not be taught by textbooks…..Similarly I came across one investor who is about 60 yrs of age retired teacher who invested way back in 1980’s kept hold onto it and made….HOW MUCH….GUESS!!!!!!!! Lakhs…Millions…Crores….Just imagine…

He invested 30 years back by just investing Rs.1,000/- initially. He subscribed in 10 shares of this Company with a face value of Rs. 100/- in 1980…

• In 1981 company declared 1 : 1 bonus = he had 20 shares

• In 1985 company declared 1 : 1 bonus = he had 40 shares

• In 1986 company split the share to Rs. 10 = he had 400 shares

• In 1987 company declared 1 : 1 bonus = he had 800 shares

• In 1989 company declared 1 : 1 bonus = he had 1600 shares

• In 1992 company declared 1 : 1 bonus = he had 3200 shares

• In 1995 company declared 1 : 1 bonus = he had 6400 shares

• In 1997 company declared 1 : 2 bonus = he had 19,200 shares

• In 1999 company split the share to Rs. 2 = he had 96,000 shares

• In 2004 company declared 1 : 2 bonus = he had 2,88,000 shares

• In 2005 company declared 1 : 1 bonus = he had 5,76,000 shares

• In 2010 company declared 3:2bonus = he have 9,60,000 shares

At the end...now in 2010 he has 9,60,000 shares of this company

Any guesses about the company?

His present valuation is about Rs. 41.86 Cr. & the company is ‘WIPRO’ - Western India Vegetable Products Ltd.

This is the power of compounding. Take a look below - 

What this simple but astonishing table shows is how if money is allowed to quietly compound, it attains enormous proportions. See how a sum of Rs. 1 lakh per annum over a period of 25 years at a rate of return of 25 % becomes an incredible Rs. 2.64 crores. Imagine if you could save 10 lakhs every year, in 25 years you would have 26 crores !!

Wipro managed to rope in many shareholders and helped them reap profits. The process started with just 17,000 shares that Wipro issued to the public at Rs. 100 each in 1947. In 1971, the company issued one bonus share for every three share held. In 1981, it was a one for one offer and this history of bonus shares kept on moving with time.

Other such examples ….....

CIPLA = Investment of Rs. 10,000/- in 1979 will fetch Rs. 95 cr.+

INFOSYS = Investment of Rs. 10,000/- in 1992 will fetch Rs. 1.5 cr.+

RANBAXY = Investment of Rs. 1,000/- in 1980 will fetch Rs. 1.9 cr.+