InvestorQ : I have heard a lot about how Wipro created wealth for shareholders. What exactly is that and did it really create billions out of nothing?
vaishnavi mhatre made post

I have heard a lot about how Wipro created wealth for shareholders. What exactly is that and did it really create billions out of nothing?

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Anu Biswas answered.
3 years ago
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In the Indian IT industry, Wipro’s name is taken in the same breath as Infosys and TCS. Undoubtedly, Wipro has been one of the marquee names in positioning Indian IT industry in the global IT map. However, what is interesting is that back in 1980, Wipro was not exactly an IT brand but a consumer products brand.

When Wipro, under Azim Premji, decided to foray into the IT industry back in 1981, nearly 90% of its revenues came from the consumer products division. Back then it was possible to buy 100 shares of Wipro at Rs.100. Can you imagine what would have happened to your investment if you had bought 100 shares of Wipro in 1980 at Rs.100 per share?

The answer is that your investment of Rs.10,000 would have grown to an incredible Rs.620 crore in 2018. You heard it right (Rs.620 crore); that is how much your Rs.10,000 would have grown to in a span of 36 years. So back in 1980, if you had resisted your temptation to spend Rs.10,000 to buy a Bajaj scooter, you could have invested the money in buying 100 shares of Wipro, which would be worth Rs.620 crore. And most likely, you would have taken early retirement and bought a small island in the Pacific all to yourself. In short you must be really enjoying your life. But the question is how did this happen.

Let us understand the calculations… Between 1980 and 2018 Wipro has announced 10 bonus issues and 2 stock splits. Effectively your 100 shares bought in 1980 would have multiplied to 1.92 crore shares today (including the latest 1:1 bonus in 2017). That gives your shareholding a princely valuation of Rs.620 crore . Remember, we are not even considering the Rs.2 crore that you will be earning each year as dividends. That valuation may change with the price fluctuations, but the moral of the story is that if you had put money in Wipro in 1980, you will be sitting on a handsome pile of money today. All this would have happened with absolutely no effort from your side! Wipro may be an exception but the moral of the story is that equities can really outperform in the long run.

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