Power of compounding: Scrip grows 116 times in 20 years
By S Jha
New Delhi, November 21: Infosys made several shareholders millionaires within one decade of listing on the stock market. TCS gave a second chance to the stock market investors to create wealth. Adani Group in the last eight years again showed the power of compounding and the resultant wealth creation for the shareholders.
Old timers in the stock markets always maintain that the way to wealth is to have enormous amount of patience and confidence to hold a very few stocks in the portfolio. Yes, the portfolio should be quite small. That delivers the power of compounding, say the market veterans.
In about two decades, a scrip of a company engaged in the manufacturing of the anti-friction bearing has grown by 116 times. This is said to be one of the rare 100 baggers in the stock market. If someone had invested Rs 10,000 in this company, the investor today would be sitting at a valuation of Rs 11.6 lakh! This is the reward of patience and picking a winner and sitting tight even if the scrip has already given multiple returns.
Timken India is engaged in the manufacturing of anti-friction bearings and other components. The company is also providing industrial services, with client base across sectors. It also manufactures transmission power products. Timken India is also engaged in manufacturing of other components and accessories for across the sector clients. The company was incorporated in 1987.
On September 13, 2002, Timken India was trading at Rs 31.70 a share. On November 21, 2022, the scrip was trading at Rs 3599 a share. This gives almost 116 times of return on the capital deployed for shares of the scrip. The scrip is trading at a PE of 66, which is way above the peers, which include the likes of NRB Bearings, Menon Bearings, Galaxy Bearings and others. Most of its peers are commanding PE in 20s or less.
For 10 years, Timken India has given a stock CAGR of 34 per cent, while for last one year it has been 88. The company is stated to be almost debt free. It has also given a profit CAGR of 27.5 per cent for the last five years. The market cap of the company has also jumped to over Rs 27,000 crore on the back of major gains in the share price of the company.
(There is no buy or sell recommendation for the company discussed in the article; one must take advice from SEBI registered investment consultants before making any decision on equity)
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