20 Saal Mein 20 Guna: Tata Group's Tech Titan TCS Gives 21x Returns From IPO Price Since Listing; Check

In the ever-volatile world of stock markets, there's an adage that holds a timeless truth: "Money is not in buying and selling stocks but in waiting." This wisdom especially rings true for IPO (Initial Public Offering) investors, who often find that the real wealth creation lies not in the initial excitement of a new listing but in the long-term commitment to holding the stock. Tata Consultancy Services Ltd. (TCS) provides an example of this principle, showcasing how patience and conviction can turn a modest initial investment into a significant fortune over time.

Tata Consultancy Services, a flagship company of the Tata Group, launched its IPO in July 2004. Priced at Rs 850 per share, the TCS IPO was a highly anticipated event, offering investors a chance to own a piece of one of India's leading IT service providers. Each lot of the TCS IPO comprised seven shares, making the minimum investment Rs 5,950 for those who secured an allotment.

For those investors, the question of whether to hold or sell was immediate and pressing. However, those who believed in the long-term potential of TCS and held onto their shares were in for a promising journey.

One of the advantages of holding onto a stock like TCS for the long term is the opportunity to benefit from corporate actions such as bonus shares. Bonus shares are additional shares given to existing shareholders without any extra cost, based on the number of shares they already own. This action increases the number of outstanding shares while proportionately reducing the share price, making the stock more affordable for smaller investors without altering the company's overall market value.

TCS has rewarded its shareholders with bonus shares on two notable occasions. The first instance occurred on 16th June 2009, when the company issued a 1:1 bonus, effectively doubling the number of shares held by each investor. Nearly a decade later, on 31st May 2018, TCS repeated this generous gesture, issuing another 1:1 bonus. These two events had a profound impact on the shareholding of those who remained invested.

For an investor who initially received seven shares through the IPO and held onto them through both bonus issues, the shareholding increased fourfold, resulting in a total of 28 shares. This multiplication of shares has played a role in wealth creation for long-term TCS shareholders.

As of today, TCS shares are trading above Rs 4,550 per share on the NSE. For an investor who held onto their shares since the IPO and benefitted from the two bonus issues, the value of their initial investment has grown exponentially.

Let's break down the numbers: with 28 shares now in their portfolio, the value of the investment stands at about Rs 1,27,400 (Rs 4,550 x 28 shares). What began as a Rs 5,950 investment in 2004 has transformed into a sum over 21 times that amount, highlighting the power of long-term investing.

This transformation reflects a critical point for IPO investors and stock market participants alike: true wealth creation often requires time and patience. The immediate gains from a stock's price surge post-IPO can be tempting, but the long-term rewards of holding onto a well-chosen stock can be far more substantial.

The wealth creation journey with TCS isn't solely about the appreciation in share price or the impact of bonus shares. Long-term investors have also enjoyed other benefits such as dividends, which TCS has regularly paid out to its shareholders. Dividends provide a steady stream of income, contributing to the overall return on investment and enhancing the compounding effect.

Moreover, TCS has also engaged in share buybacks, another shareholder-friendly move that often results in a higher share price. By reducing the number of shares outstanding, buybacks can increase the value of remaining shares, providing an additional boost to long-term investors.

The story of TCS's share price history serves as a potent reminder that successful investing is as much about choosing the right stock as it is about the patience to let that investment grow. For those who participated in the TCS IPO and chose to hold onto their shares, the rewards have been extraordinary.

This example also reinforces the importance of sticking to one's convictions. If you believe in a company's long-term potential, it often pays to hold onto the stock, weathering short-term market fluctuations in favour of long-term gains. As the TCS example shows, the combination of bonus shares, regular dividends, and stock price appreciation can turn a modest investment into a substantial fortune over time.

*Inputs from Mint*