A man turned 10,000 Rs into 704 crores (Rags to Riches)

A man turned 10,000 Rs into 704 crores (Rags to Riches)

Note – This story is fictitious (not real). However, it is still a great source of inspiration. Prime source of this article is Prudent Equity, putting it in my words.

Hey Scientists,

Are you listening to me? Bring me a time machine. I want to convey a message to my father back in the 1980s.

What message? To invest in a company (guess the name until I open it later)

Why? The story of a “Rags to Riches” which I’m going to dictate now will tell you – “Why”. Just stay tuned.

How a chap turned his 10,000 Rs into 704 crores; (Rags to Riches)

Unbelievable? Yes, but very true. The miracle happens through 11 bonus issues and 2 share-splits that transformed Mohammed’s 100 shares to an unbelievable 96 lakh shares, each now valued at Rs. 545.

Mohammed Anwar Ahmed, a young resident of Amalner village, in the 1980s, received 20,000 bucks as inheritance after his father’s death. The 27-year old was wondering to start a small trading business of his own but his decision was changed when he met a young broker from Mumbai, Satish Shah, who had taken a job of underwriting the shares of a company in Amalner. This luck by chance meeting changed the whole map of his rest of the life.

The question that Shah asked him was : “Do you know anyone here who owns shares in that factory?” pointing to the company plant. Mohammed replied that the owners of the factory stay in Bombay. In short 15 minutes, Satish explained to Mohammed, how owning a share could make one a part owner of the company. This made Mohammed inquisitive.

He helped Satish Shah go door to door to collect shares from willing sellers (in very small towns nearly everyone knows each other) and for himself bought 100 shares of Rs.100 face value, thus investing Rs.10,000 from the total of Rs.20,000 that he had. The rest, he invested in starting a tiny trading business.

From then on Mohammed started to think himself as part owner of that company and vowed never to sell a single share.

Today, Mohammed’s investment of Rs. 10,000 in the initially small company of his hometown is worth an unbelievable Rs. 704 crore.

Here a short journey to wealth – How’s his initial investment of Rs.10,000 grew to over Rs. 704 crores.

He had invested in 100 shares at face value of Rs.100 in 1980. The initial investment was Rs.10,000.
In 1981, the company declared a 1:1 bonus. He now had 200 shares.
In 1985, the company declared 1:1 bonus. He, therefore, had 400 shares.
In 1986, the company split the share to Rs.10. He thus had 4000 shares.
In 1987, the company declared 1:1 bonus. He hence had 8000 shares.
In 1989, the company announced a 1:1 bonus. Now he had 16,000 shares.
In 1992, the company declared a 1:1 bonus. By now he had 32,000 shares.
In 1995, the company declared a 1:1 bonus. He then had 64,000 shares.
In 1997, the company declared 2:1 bonus. He now held 1,92,000 shares.
In 1999, the company split the share to Rs.2. He now had 9,60,000 shares.
In 2004, the company declared 2:1 bonus. He thus had 28,80,000 shares.
In 2005, the company declared 1:1 bonus. He came to have 57,60,000 shares.
In 2010, the company declared 2:3 bonus. He now had 96,00,000 shares.

The current market price is Rs.545 per share. So, the total worth of the shares is valued at around Rs.524 crores (96 lakhs × 545)

Here comes another shocker. Every year the company announces dividends.
The last year 2014-15 (financial year), the company announced a total of Rs.12 per share.
Rs.12 × 96 lakhs = Rs.11.52 crores for the year ended 2015.
And the most Miraculous part is that dividends are also not taxed at the hands of the shareholder (as of FY 2014-15). So you can take all of this Rs.11.52 crore for yourself.

Over the past 3 and a half decades, the company regularly paid out dividends and increased them almost every year. Cumulatively he received Rs.180 crores as dividend over the past 35 years.

Total wealth acquired by Ahmad; 524 crores from share valuation + 180 crores from the dividend. (Total = 704 crores)
Thus proved, how a man turned his investment of Rs.10,000 into an overall wealth of 704 crores (524 + 180). Isn’t it a one of dashing rag to riches story?

Even at the adversity of dotcom bust, as well as the 2008 market crash, he has not sold even one share during these past 35 years – Because, there was no need to.

Who the hell will sell shares, when its dividend payout accounts to Rs. 180 crore over these three and a half decades?

By this time, most of you have guessed this miraculous stock, and you are right, it is WIPRO.

Mohamed Premji and his son Azim Premji not only grew their tiny company into one of the world’s largest IT service firms, but respected their original partners, never allowing their tiny participations to be diluted, but expanding capital only through bonuses, thereby accumulating wealth for all.

Today, Amalner is a city of many millionaires. There are hundreds in Amalner who hold ten original shares of Wipro worth 1000 bucks then and around Rs. 70 crores now. Even a 100 rupees investment then, worth around 7 crores now.

Mohammad Anwar Ahmad is now retired and donates freely to charity from the dividends he receives. His foreign educated children often advise him to sell the shares but he has kept his vow of not even selling a single share till Mr. Azim Premji is the working Chairman.

This teach us a lesson of patience, discipline and conviction.

Now, I wondered ( even did you), what if my father invested in Wipro back in the 1980s. We would be a millionaire by now.

Personal lesson from Ahmed;
Don’t treat shares as a product which goes up and down. Think of it as a part of business. When you buy a share, you are not buying a product instead a part of business. That means you are a part owner of the business. So, at the time of adversity, it is your duty to protect your business, not to sell its share. This is a prudential step where most of the investor falter.


Disclaimer: Pal! I don't own your money so do not take trading decisions based solely on the matter above; if you do, it is entirely at your own risk without any liability to me. Any information on blog is not any financial advice and should not be construed as such.
About Sowmay Jain 53 Articles
Hello! I’m from Hub of IT (ha!) Hyderabad, India. I work full-time from home, making a living from my blog and another dynamic medium from my investments. Like so many other people, I’m on my Plan B career. At the same time, I share ideas and techniques to help my readers in mastering stock market and overcoming losses.
  • Thanks for your valuable feedback.
    I’ve no idea of any website like you stated above. However, I’ll let you know if found any and also you let me know in reverse case.

  • Thanks! Prashant. I’m glad, you find it interesting. Stay in touch.

  • Astha Jain

    Can you tell a brief about how should i start my Investment career, what books should I read and what type of account with which organization should I open! thanks

  • Wow! I was not aware that the real author of this story is Mr. Siddharth and that too, fictitious. I found this story on many sites like Quora, Nasdaq, Mootley etc. Read it and poured it out in my words. Yes! the story is copied but not the words. However, I added the credit note at above the fold.