One of the golden rules of the stock market is that you cannot be impatient. It is all about patience, and if you have that, sky is the limit. This holds true for equity investors who invested in MRF shares in April 1993 and held on. MRF (Madras Rubber Factory), which debuted as a public company with a face value of Rs 10 per share, has delivered more than 7,40,109 per cent returns to investors in the last 25 years. On April 27, 1993, the company's share closed at Rs 11 compared to the current price of Rs 54,488 on BSE. The scrip hit its lifetime high of Rs 81,423 on April 30, 2018.
MRF shares have generated multi fold returns for the investors over the years. If an investor had invested Rs 1 lakh in MRF shares 25 years ago, the corpus would have been worth Rs 74.02 crore in April 30, 2018 when the stock was its peak.
According to BSE data, the MRF's shares grew sharply by 2,210 per cent between May 11, 2009 to May 9, 2019. The stock growth consolidated to 154.83 per cent in the last five years. However, the company's shares have declined 28.72% during the last one year and 18.65% since the beginning of this year.
For the financial year 2018-19, the company reported standalone net profit of Rs 1,097.87 crore, up marginally from Rs 1,092.28 crore during the previous fiscal. Total income during FY19 stood at Rs 16,254.47 crore, as compared to Rs 15,509.55 crore during the previous year, registering a year-on-year growth of 4.80 per cent.
During the January-March quarter, the tyre manufacturer posted a 14.91 per cent decline in its standalone net profit at Rs 293.83 crore as against Rs 345.32 crore in the same quarter last year. Revenue from operations, however, climbed to Rs 4,073.45 crore during Q4FY19 as compared with Rs 3,835.50 crore in Q4FY18.
In the last one year, MRF has declared an equity dividend of 600% (in total) on its face value Rs 10, which amounts to Rs 60 per share. At the current share price of Rs 54,488, the dividend yield is just 0.11 per cent, which is very low compared to share price.
MRF is the most expensive stock in the Indian equity market, which costs Rs 54,488 for one share. This is because MRF has never split its stock. Companies split their stock time to time to maintain liquidity. But MRF has never resorted to share splitting or issuing bonus shares.
But, why is MRF not splitting its share? According to market analysts, the promoters might not want to increase its share holders base, or they want only serious investors. The reason behind this can be that as the price of the share is high, a retail trader with small investment won't be willing to buy MRF shares. Only the investors with good investment and long term goal will express interest in the company's share. This will also maintain the decision making power with a select few board members.
This company was started by K. M. Mammen Mappillai as a toy balloon manufacturing unit in 1946 at Tiruvottiyur, Madras. In 1952, the company ventured into the manufacture of tread rubber. Madras Rubber Factory limited was incorporated as a private company in November 1960 and ventured into manufacture of tyres in partnership with Mansfield Tire & Rubber company based in United States. In 1967, it became the first Indian company to export tyres to the US. Today, the company manufactures rubber products including tyres, treads, tubes and conveyor belts, paints, toys (Funskool) and even cricket bats.