Money magnet Charlie Munger once said that big money is not in the buying or selling but in the waiting. This holds well when it comes to primary market investment because investing in an IPO means investing in a business, irrespective of its size. If a company is equipped enough to grow at a faster rate, then one should not look at the size of its business.
Similarly, if a stock is good enough for investing, one shouldn't look at whether it's a small-cap, mid-cap or large-cap, or even a penny stock. Likewise, if a company is strong enough to sustain its business growth, then one should look at holding the stock post-listing for a longer period.
While holding a stock or an IPO after share allocation for a longer period, an investor enjoys some additional benefits like rewards from the capital reserves of the listed entity. These rewards could be bonus shares, stock splits, dividends, buyback of shares, etc. Prima facie these rewards may not look big, but if we look at Sarveshwar Foods IPO journey, then we would come to know how stock split and bonus shares impact the absolute return of an investor.
As per the information available on the BSE website, Sarveshwar Foods shares traded ex-bonus and ex-split on 15th September 2023. It traded ex-split for stock subdivision in a 1:10 ratio. Likewise, it traded ex-bonus on the same date for the issuance of 2:1 bonus shares.
Sarveshwar Foods IPO was launched in March 2018 at a price band of ₹83 to ₹85 apiece. A bidder was allowed to invest in this NSE SME IPO in lots and one lot of the IPO comprised 1600 shares. If an allottee had remained invested in this FMCG stock after listing to date, its shareholding in the stock would have grown to 16,000 after a 1:10 stock split. After the issuance of 2:1 bonus shares, the shareholding would have further grown up to 48,000 (16,000 x 3).
So, if an investor had remained invested in the IPO after the share listing, the absolute value of one's investment of ₹1.36 lakh would have grown to ₹4,65,600 or ₹4.65 lakh. So, the net return that a long-term investor would have garnered after remaining invested in the post-listing phase had been to the tune of 250 percent.
Disclaimer: The views and recommendations above are those of individual analysts, experts, and broking companies, not of Mint. We advise investors to check with certified experts before making any investment decisions.
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