If an investor, would have invested Rs 1 lakh in the TCS (IPO) at a price of Rs 850, his valuations would be approx. Rs 13Lakhs after two bonus issues were declared by the company one in July 2006 and other in June 2009. This is in addition to the tax free dividends received yearly. How?
1) TCS came out with its IPO in the month of July, 2004; the price band was Rs 775-Rs 900. The issue price of TCS shares was fixed at Rs 850.
2) TCS shares got listed on August 25, 2004 at a premium of 26.6 per cent at Rs 1,076.
3) From August 25, 2004 till now, TCS has issued bonus shares twice in the ratio of 1:1 (one bonus share for every share held). The bonus shares were issued first on July 28, 2006 and later on June 16, 2009. So, an investor who bought just one share in TCS’ IPO, by investing Rs 850, would have 4 shares of TCS by now.
4) The value of Rs 850 invested in TCS in August 2004 would have gone up to Rs 9,904.8 (stock price of Rs 2,476.20 x 4 bonus shares) based on Friday’s closing price. This turns out to be a return of 1065 per cent over the last ten years or a CAGR of 27.8 per cent. This return is over and above the dividends paid by the company.
5) An investment of Rs 850 in TCS IPO in 2004, would have earned a total dividend income of Rs 733.5 by now.