August 26, 2014 Leave a comment
Yesterday, TCS, India’s largest software exporter, celebrated 10 years of listing on the stock exchange. It was on August 25, 2004, when TCS made its trading debut on Dalal Street at a 27% premium to its issue price. And, there has been no looking back for the stock, churning a compounded annual return of 27% for a decade.
The market capitalisation of the company has risen from Rs47,232 crore to a mammoth Rs4.94 lakh crore in 10 years of listing -the highest among all Indian listed companies.
Investors who stayed put in the stock in the period would have made over three times the average annual compounded returns from fixed deposits. For instance, an investor, who would have put Rs1 lakh in the TCS initial public offer (IPO) at Rs850 a piece, would be sitting on Rs12.52 lakh on Monday . TCS is currently trading at Rs2,521 after two bonus issues -one in July 2006 and other in June 2009. The company has also paid handsome dividends.
In contrast, if the investor had put Rs1 lakh in a fixed deposit with 9% interest in 2004, he would have made Rs2.37 lakh by now without considering taxes.
But, there is a high possibility that many investors would have dumped their shares in the first five years of listing.
Till 2009, the stock returned a boring 66% against Sensex’s gain of 226% during the same period. However, in the subsequent five years, it has had a dream run of 502%.
Among other technology stocks, returns from HCL Tech have been comparable with those of TCS. HCL shares have returned 26.9% on a compounded annual basis. Other IT majors like Infosys and Wipro have grown 18.2% and 14.3% annually, respectively, for the past 10 years.