Amalner – How Wipro company made a village of Millioniares

In the year of 1947, WIPRO Ltd.’s current chairman Azim Premji’s father Mohammad Hussain Premji set up the first plant of Western Indian Vegetables Product Limited (WIPRO Ltd) to make Vanaspati ghee, laundry soap and cooking oil in Amalner, a small town of Maharastra. No, it was not an IT company back then.

wiprosunflowervanaspatighee1kgMany residents of Amalner worked at the plant and some of them were given shares in the company. It’s estimated that around 3% stakes of WIPRO, amounting to 250 crores of shares worth of 3448 crore about are owned by residents of Amalner.

As a producer of Vanaspati; it didn’t made such gains in it’s earlier years.In 1966, highly respected, Mr. Azim Premji took over the reins of the company by becoming Chairman.

When it was IPOed in late 1970s wasn’t fully subscribed and till during 1985, nobody wanted WIPRO shares. If you had to trade in WIPRO, you had to do it only in Amalner. Bombay brokers were clueless. You could see WIPRO share prices listed only once in 15-20 days there.

Stories of Amalner

#1 Shantilal Jain got the shares when the Face Value of the Stock was Rs 100 at that time. The share price even moved down to Rs 35 without any buyers at one point in time.

Its price fell below the face value and there were no buyers even at Rs 35. Rs 100 at that time was not a small amount and it was not easy to sell it at a loss. So I decided to hold the share – Shantilal Jain

Jain didn’t sell it when it was 35, the worth of that Rs 100 share, after adjusting for splits and bonuses, is now worth of Rs 5.5 crore.

amalner#2 Zahoor Ahmed Haji Sheikh Masoom, 65, the patriarch of a 32-member family, owns about 70,000 WIPRO shares which was last valued at over Rs 10 crore. “Mujhe thodi si English ati hain,” says the retired headmaster as he throws a smile at his curious kin peeping through the door. “My father was a tobacco merchant but also sold WIPRO products. Mohammad Seth(Ajit Premji’s father) used to come to our shop and that’s how he took those shares,” he explains.

The five shares that Shaikh Masoom bought in 1947 from Premji senior for Rs 100 each have today gone up after several bonuses, stock splits and a bit of trading to 70,000. Today, Zahoor and his brothers, all except one (Kamil Ahmed, who works for WIPRO), lead a contented retired life.

He (Azim Premji) is a Kohinoor. He deserves to flourish. With his growth we will also grow. Azim seth ‘ne Amalner ka naam bahut uncha kiya – Zahoor’s younger brother Manzoor Ahmed.

#3 There’s also a retired commerce professor who sold all but 50 of his WIPRO shares to build a Rs 13.5-lakh hospital for his son. The hospital, of course, is named WIPRO House because it was built entirely out of WIPRO share earnings.

A journey from 10,000 INR to 500+ Cr.

This is a fictional story originally written in Prudent Equity based on 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.

indian share marketIn 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.

Over the last 36 years, this is how his wealth has grown.

1981: declared a 1:1 bonus. He now had 200 shares.
1985: declared 1:1 bonus. He therefore had 400 shares.
1986: split the share to Rs.10. He thus had 4000 shares.
1987: declared 1:1 bonus. He hence had 8000 shares.
1989: declared a 1:1 bonus. Now he had 16,000 shares.
1992: declared a 1:1 bonus. By now he had 32,000 shares.
1995: declared a 1:1 bonus. He then had 64,000 shares.
1997: declared 2:1 bonus. He now held 1,92,000 shares.
1999: split the share to Rs.2. He now had 9,60,000 shares.
2004: declared 2:1 bonus. He thus had 28,80,000 shares.
2005: declared 1:1 bonus. He came to have 57,60,000 shares.
2010: declared 2:3 bonus. He now had 96,00,000 shares.

It’s been 33 years since Ahmed took the plunge in this ownership model. Today, WIPRO’s share price is 463.85 making it worth of 445 Cr.

The company has been a regular dividend payer. He received 120 Cr.+ worth of dividends over the years. It’s a huge of income considering it’s tax free (Actually companies pay tax on dividends directly to the Government before issuing the dividend).

Thus, an investment of 10,000 has turned into 550 Cr+.

WIPRO is more than a company

For the people of Amalner, WIPRO is something more than a company. None of them would ever want to let go entirely, regardless of what analysts say. Indeed, one popular saying at Amalner is that if you buy 10 shares of WIPRO the day your child is born, it will earn enough over the years to pay for the child’s higher education or marriage.