It’s been 40 years since Mohammed Anwar Ahmed took his first plunge into long term owning of stock. The total worth of his shares is over 600 crores and the cumulative dividends he has received is more than 100 crores. Let’s take a deep dive into how Anwar has built a fortune just by holding onto a great company for the last 40 years.
350 kms away from the busy city of Mumbai, on the banks of the Bori river, in Jalgaon district, is a small city called Amalner. In 1946, a company named Western Indian Vegetables Product Limited (WIPRO Ltd) was listed in the Stock Exchange.
In 1947, the company’s first plant was set up to make Soap, Vanaspati, Ghee and Edible Oil in Amalner by Mr. Mohammad Hussain Premji. Many residents of Amalner worked in the plant and eventually became shareholders of the company. In 1966, highly respected, Mr. Azim Premji took over the reins of the company by becoming Chairman.
A right’s offer in the late 1970s wasn’t fully subscribed and the Face Value of the Stock was Rs 100 at that time. There were investors who bought just 1 share of the company at that point in time since even a Rs.100 was a big deal. It might be interesting to note that the share price even moved down to Rs 35 without any buyers at one point in time. A few of them held on, with complete trust in the capabilities of the management.
A resident of Amalner, Mohammed Anwar Ahmed’s father owned a large farmland in the 1970’s. After his father’s demise, he had around Rs. 20000 with him. In 1980, while Ahmed sat near a tea shop, a young stock broker from Mumbai stopped to ask a question. This meeting would change the life of Ahmed. The broker had come to Amalner to buy as many shares as he could on behalf of some clients in Mumbai. The question that the broker asked was, “Do you know anyone here who owns shares in that factory?” pointing to the WIPRO plant. Ahmed replied that the owners of the factory stayed in Mumbai and that many residents worked in the plant and they would be holding shares of the company.
In the next 15 minutes, the broker explained to Ahmed, how owning a share could make one a part owner in the company without working in the company. This made Ahmed inquisitive and the meeting lasted for 30 more minutes. Ahmed, completely convinced of the ownership model, helped the broker 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.
How his initial investment of Rs.10,000 grew to over Rs.500 crores.
- In 1981, the company declared a 1:1 bonus. He now had 200 shares.
- In 1985, the company declared a 1:1 bonus. He had 400 shares.
- In 1986, the company split the share to Rs.10. He thus had 4000 shares.
- In 1987, the company declared a 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 a 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 a 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 a 2:3 bonus. He now had 96,00,000 shares.
- In 2017, the company declared a 1:1 bonus. He now had 1,92,00,000 shares.
- In 2019, the company declared a 1:3 bonus. He now had 2,56,00,000 shares.
Over the 40 years, this value has now grown to become around 640 crores and Anwar has received more than 100 crores worth of dividend till now. Anwar has vowed that he will never ever sell a single share in Wipro and will pass it on to his children.
There are multiple residents of Amalner who have turned their fortune by holding shares of Wipro for the long term and they are meeting their expenses just via their holding in Wipro.
The lessons which you can get from this are:
- Invest in good businesses with visionary management
- Dividends are a great way to build your wealth over the long term
- There might me short term fluctuations as seen above, but if the business is good enough ,it will definitely compound your money over the long term
- Not booking profit in short rallies and continue holding shares in good businesses
This is the benefit of holding long onto great businesses which have the potential to compound your money. Although this is the extreme end of the story, there are many such instances where just one stock has made people achieve financial freedom. I believe that the stock market is one such machine which has the potential of helping the middle class people like you and me to achieve financial freedom if you are patient and disciplined enough to let your money compound over 15-20 years in great businesses. Then these great businesses will take care of you if you stick with them. I’ll end this article with a quote:
Someone is sitting in the shade today because someone planted a tree a long time ago.
— Warren Buffett