9,99,000% returns in 30 years: MRF's journey on Dalal Street

MRF, India's largest tire manufacturer, wrote history at Dalal Street today. During intraday trading, its per share price crossed the Rs. 1 lakh mark, becoming the first Indian company to do so in terms of absolute value. The shares of the tire major touched an intraday high of Rs. 1,00,300 a piece on BSE. Let's see what led to MRF's rise.

Why does this story matter?

No stock in India has ever crossed the Rs. 1 lakh barrier. Therefore, MRF trading beyond that is a huge milestone for the company and Dalal Street. The astronomical price of MRF's shares does not give us the whole picture, though. The pertinent question is whether MRF's share price makes it an attractive proposition for investors.

MRF debuted on BSE at face value of Rs. 10

MRF, or Madras Rubber Factory, is an appropriate example of how patience can reap rewards in the stock market. The company made its debut in April 1993. Its stock had a face value of Rs. 10 a piece then. When the trading ended that day, it closed at Rs. 11. Today, the stock closed at Rs. 99,900, delivering nearly 9,99,000% returns in 30 years.

MRF has never split its stock

MRF's shares have been one of the most expensive in India for several years. The secret behind this is the lack of stock splitting by the company. Listed companies typically split their stocks to improve liquidity and widen the investor base. Stock split lowers the value of a stock. MRF has never done it, and that's the primary reason behind its sky-high price.

Why is MRF not a fan of stock splitting? 

Companies usually split stocks to entice investors and raise additional investment. There are multiple reasons why MRF has never done this. Chief among them is the company's strong fundamentals. The company has provided great value to investors over the years. Lack of stock splitting also helps keep the shares non-volatile. This benefits current investors and keeps speculators away from the company.

MRF's PE value is low

MRF has the highest price-tag among any listed stock in India. However, its heavy price-tag does not make it the most expensive. Investors usually determine the value of stocks based on price-to-earnings (PE) value. MRF has a PE ratio of 55.04. Meanwhile, JITF Infralogis tops the list on BSE with a PE ratio of 3,974.38.

Most analysts recommend selling MRF's shares

In the past year, MRF's shares have rallied over 45%. In the last 10 years, it gave negative returns only three times. However, most analysts do not advise buying or holding the stock. Out of 10 analysts, only one recommended buying MRF's shares. Seven out of 10 recommend selling the stock. Out of the seven, four strongly advise selling it.