Multibagger IPO: BSE SME stock turns ₹1.44 lakh of allottees into ₹14.42 lakh in eight years

1:10 Stock split effect: As Rome was not built in a day, a stock market investor can't become rich overnight. It is often said that money is not in buying and selling stocks but in waiting. This rule also applies to an IPO (Initial Public Offering) investor. If an IPO investor is convinced about a company's business prospects, then irrespective of size, one should stick with one's conviction and hold the stock as long as possible. A stock split is a corporate action that increases the number of a company's outstanding shares by dividing each share, which in turn reduces its price. This does not affect the company's market value, but it does make the stock more affordable for smaller investors.

An IPO investor is advised to keep the scrip as long as possible to create wealth on the premium that promoters of the company have offered to its investors in the primary market. So, by holding a stock for a long term after share allocation, an allottee enjoys the benefit of wealth creation. By having a stock for the long term, they want the benefit of various other rewards like dividends, bonus shares, stock splits, buybacks of shares, etc., which helps an IPO allottee in wealth compounding.

To truly grasp the potential for wealth creation through long-term investment, let's delve into the inspiring journey of Shanti Educational shares. Shares of this company were offered in the Indian primary market in June 2016. Shanti Educational IPO opened on 1st June 2016 and remained open until 6th June 2016. the BSE SME IPO was offered at a fixed price of ₹90 per equity share. A bidder was allowed to apply in lots, and one lot of the SME IPO comprised 1600 company shares. The SME stock was listed on the BSE SME exchange on 14th June 2016. The SME stock had a par listing on the BSE SME Exchange at ₹90 apiece. However, it ended at ₹92 on the listing date.

Stock split history

Despite par listing, if an investor had remained invested in the SME stock till today, the investor would have got various wealth creation options. The SME stock witnessed a strong northward movement in the last eight years. The company declared a 1:10 stock split as well. So, if an allottee had remained invested in the scrip till today, its shareholding would have surged to ₹16,000 (1600 x 10) after the 1:10 stock split. The SME stock traded ex-split in a 1:10 ratio on 21/07/2022.

₹1.44 lakh turns to ₹14.42 lakh

As the SME IPO was launched at a fixed price of ₹90 apiece and one lot comprised 1600 shares. The minimum amount required for a bidder to apply for the SME IPO was ₹1,44,000 ( ₹ ₹90 x 1600). If an allottee had remained invested in this SME stock till date, its shareholding in the stock would have surged to 16,000 after 1:10 stock split in 2022. Shanti Educational share price ended on Friday at ₹90.17 apiece on BSE. Hence, the absolute value of an allottee's ₹1.44 lakh would have turned to ₹14,42,720 ( ₹90.17 x 16,000) or ₹14.42 lakh. This wealth creation journey from ₹1.44 lakh to ₹14.42 lakh is a testament to long-term stock holding and splits' potential benefits.

Shanti Educational Q1 results 2024

The company recently declared its Q1FY25 results in which it reported 8.60 crore, which is 13.30 percent higher from the total income of ₹7.59 crore in Q1FY24. On QoQ basis, the company reported over 200 percent rise in total income against ₹2.86 crore total income in Q4FY24.

The company's net profit in Q1FY25 stood at ₹2.76 crore, which is 18.50 percent higher from its net profit in the corresponding period in the previous fiscal.

Disclaimer: The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.