Power of Compounding - A real life example

How much can you make in 25+ years by just investing Rs.10,000 initially in any of financial instruments ?

Let us look at the real time example…

If you have subscribed in 100 shares of ________ company with a face value of Rs. 100 in 1980…

In 1981 company declared 1:1 bonus = you have 200 shares

In 1985 company declared 1:1 bonus = you have 400 shares

In 1986 company split the share to Rs. 10 = you have 4,000 shares

In 1987 company declared 1:1 bonus = you have 8,000 shares

In 1989 company declared 1:1 bonus = you have 16,000 shares

In 1992 company declared 1:1 bonus = you have 32,000 shares

In 1995 company declared 1:1 bonus = you have 64,000 shares

In 1997 company declared 1:2 bonus = you have 1,92,000 shares

In 1999 company split the share to Rs. 2 = you have 9,60,000 shares

In 2004 company declared 1:2 bonus = you have 28,80,000 shares

In 2005 company declared 1:1 bonus = you have 57,60,000 shares

At the end of 2005…

You have 57,60,000 shares of the company

Any guess about the company ? Its an Indian company

Any guess about the present valuation ?

The result of ‘Power of Compounding’

Your present valuation is about

Rs. 200 Cr.+ & The company is ‘WIPRO’

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. 1000 in 1980 will fetch Rs. 1.9 cr.+

If you think the above is not possible then read on…

A Chartered Accountant by profession Mr. Rakesh Jhunjhunwala is a name today on every Indians mind. He is often termed as Warren Buffet of India by many. His name catapulted into fame when Forbes, in 2007, ranked him as the 51st richest man in India. Son of an income tax officer late Shri. RadheShyam Jhunjhunwala, he started investing in stocks while in college. Rather than take a job, he started investing, with around an initial capital of Rs.5000 in 1985 when the BSE Sensex was at 150. His privately owned stock trading firm Rare Enterprises, the name derived from first two initials of his name and wife Rekha's name.

NAME OF COMPANY	SHARES HELD (as on 30/06/08)	APPROX (as on 5/08/08)	VALUE (Rs.in crores)
TITAN INDUSTRIES	39,85,756	1277	508.98
PRAJ INDUSTRIES	1,33,76,624	188	251.48
LUPIN LTD	27,52,135	753	207.24
CRISIL	5,50,000	3631	199.70
NARAGJUNA CONSTRN	1,24,50,000	134	166.83
BILCARE	20,25,000	640	129.60
PUNJ LLOYD	50,40,000	291	146.66
PANTALOON RETAIL	23,30,895	353	82.28
KARUR VYSYA BANK	24,94,073	348	86.79
BHUSHAN STEEL	8,20,000	922	75.64
GEOJIT FINANCE	1,80,00,000	43	77.40
PROVOGUE INDIA	3,80,000	850	32.30
GARWARE WALL ROPE	5,00,000	86	4.30
PRIME FOCUS	8,82,500	460	40.59
VICEROY HOTELS	47,50,000	51	24.22
INFOMEDIA INDIA	15,06,062	155	23.34
AGROTECH FOODS	17,03,259	126	21.46
ZENOTECH LABS	11,50,000	113	12.99
MID-DAY MULTIMEDIA	22,50,000	26	5.85
ION EXCHANGE	5,00,000	153	7.65
ZEN TECHNOLOGY	5,00,000	164	8.20
ALPHAGEO	1,25,000	413	5.16
JB CHEMICALS	10,81,650	47	5.08
AUTOLINE INDUSTRIES	12,11,622	182	22.05
MRO TEK	5,70,834	51	2.91
HIND OIL EXPLOR	61,00,666	136	82.97
TOTAL VALUE OF PORTFOLIO – Rs. 2231.67 crore.