Find enclosed one more company past performance analysis. Britannia was originally listed in Kolkata Stock exchnage in early 1900. However, subsequently, it issued shares to Indian Public due to FERA regulations at price of Rs 15 (Face value 10+ Premium of Rs 5) on 13 October 1977. I have calculated equity return since 1977.
Over last 42 years, the company generated CAGR return of 26.7% p.a. as compared net profit CAGR of 17.2% during FY1978-2020. The retun does not include bonus debentures issued by the company. 100 shares with investment amount of Rs 1500 invested in 1977, would have increased to 4,410 shares (split and bonus adjuted) with price of Rs 2690, providing current value of Rs 1.18 Cr. Over the period, the company Dividend yield remain in range of 1-4% and PE which was initially low, now trading at very high levels. Return on net worth over last 42 years has remained at 26.6%, excellent in my view.
Find enlcosed key highlights and excel working file for everyone reference.
Dr Reddy’s Limited: One of Original Indian Pharma Trio (other two being Ranbaxy, now part of Sun Pharma and Cipla) has performed excellent for its investor since its listing in 1986. Over period of 34 years, while the net profit grown at CAGR of 27% p.a., the shareholder return (measured as XIRR of cashflow including dividend) has been around 44% p.a over 34 years since company listed in 1986.
The company came out of IPO in 1986 at par for face value of Rs 10 paid up equity share. 100 shares invested in 1986 have become 3,600 shares due to split/bonus. Over the period of 34 years, Dividend yield has remained at around 1%, ROE of around 25% and PE ratio of 44 times.
Find enclosed key highlights and my excel working. I could not get financial data during FY1990-2000 period and hence there is reason for my calculation to deviate from actual PE and Dividend yield over life.
Over a 4 decades delivery 75%+ shareholder return who hold since IPO in 1979 !!! I just wish I am liucky to hold such investment as rarely would my SKILL would allow me to get this kind of returns !!! Welcome to smiling world of Colgate. I am not sure as customer of Colgate I would be smiling, but many investors would definitely. This is the top return in more than 40 companies return data I have analysed.
Find enclosed my key highlights on my working:
In my study, this time I also try to develop another period 1994-2020 period. In 1994, PE was highest at around 88 times. In 2020, PE was around 42 times. Despite PE de-rating by 50%, XIRR for shareholder return were reasonable 8.4%. While CAGR 8.4% p.a. it is not great, but still respectable in my view, in case one consider to Fixed income alternatives. This assist me work with high PE companies like Honeywell and 3M India. One another worth consideration is amazing consitency in RONW above 50% over 4 decades.
I made small mistake in Calculation of return. For CY1979, the company declared dividend of Rs 6.68 per share. However, the IPO of company was on 1 March 1979. During that time, the shareholder of new share used to get prorata dividend for the period for which new shares issued. Hence, instead of for full 12 months, only 10 months dividend would have accrued to the shareholder who got new shares. So dividend of Rs 6.60 per share, would reduce to Rs 5.50 for new investor. Just one small change of Rs 1.1 per share in dividend with total value of Rs 110 reduction in first dividend has material impact on return calculation. Enclosing revised working file for everyone reference. My apology for this error (and in advance apologies for mistake which I am not aware as of now ). This is what compounding would do over period. 75% XIRR over 40 years, decline to 60% XIRR with just 110/- reduction in First year dividend !!! Colgate Past Return Revised in December 2020.xlsx (63.7 KB)
). This is what compounding would do over period. 75% XIRR over 40 years, decline to 60% XIRR with just 110/- reduction in First year dividend !!!