MRF: From Rs 11 on debut to Rs 1 lakh

In a significant development, tyre manufacturer MRF achieved a new milestone on Tuesday as its stock crossed the remarkable Rs 1 lakh mark. During the day, the stock soared to a staggering Rs 1,00,300, reaching its 52-week high on the BSE. Ultimately, MRF's shares closed at Rs 99,950.65, reflecting a 1.02 per cent gain. In intra-day trading, the stock witnessed a notable increase of 1.37 per cent, reaching Rs 1,00,300.

Over at the NSE (National Stock Exchange), MRF's shares exhibited impressive performance, advancing by 1.48 per cent and hitting a record high of Rs 1,00,439.95 during the day. The day concluded with the stock closing at Rs 99,900, reflecting a gain of 0.94 per cent. MRF's stock has rallied by an impressive 12.89 per cent thus far, cementing its position as one of the leading stocks in the Indian stock market.

Santosh Meena, the Head of Research at Swastika Investmart Ltd., acknowledged MRF's remarkable achievement and said, "MRF has made history by becoming the first 6-digit stock after surpassing the impressive milestone of 1 lakh." This accomplishment underscores the company's significant growth and prominence in the Indian stock market.

The stock closed above the Rs 90,000 threshold on January 20, 2021, paving the way for its recent milestone. Before this achievement, MRF had achieved a record high of Rs 99,933 on May 8. Despite remarkable growth, MRF has never issued bonus shares or conducted a stock split, distinguishing itself in the market. The company recently declared a final dividend of Rs 169 per share, bringing the total dividend payout for FY 2023 to Rs 175.

MRF reported a substantial net profit of Rs 410.7 crore for the March quarter, showcasing an impressive growth of 161.5 per cent compared to the previous year's figure of Rs 157 crore. Additionally, the company's EBITDA (Earnings before interest, taxes, depreciation, and amortisation) reached Rs 843.1 crore during the quarter under review, reflecting a remarkable 59.8 per cent increase from the Rs 527.6 crore reported in the quarter ended March 2022.

MRF's shares have delivered positive annual returns for five consecutive years between 2013 and 2017. Building on this success, the stock experienced a 20 per cent gain in 2022, and it has already surged by an additional 12.7 per cent in the current year, underscoring its continued upward trajectory and investor confidence in the company's prospects.

Observers noted that in a departure from the norm, MRF had chosen not to split its shares, a strategy commonly employed by companies to enhance appeal among retail investors. Stock splits typically aim to make shares more affordable and increase liquidity, all while ensuring that the company's dividend-paying capacity remains intact.

According to Makarand Joshi, Founding Partner of MMJC & Associates, a corporate compliance firm, such a move allows greater accessibility to a broader base of investors.

 Remarkably, MRF has never initiated a stock split throughout its history. The company did offer bonus shares on two occasions, with a ratio of 1:2 in 1970 and 3:10 in 1975. However, since then, there have been no further instances of stock splits or bonus share issuances by MRF.

“The decision by MRF to maintain its share structure in its original form sets it apart from the traditional approach in the market. While stock splits are commonly used to attract investors and increase market participation, MRF's steadfastness in preserving its share value signals a unique strategy to sustain its market position and investor confidence,” a broker from Dalal Street said.

MRF started with K. M. Mammen Mappillai laying its foundation in 1946 as a modest toy balloon manufacturing unit in Tiruvottiyur, Chennai (then Madras). However, it was not long before MRF set its sights on greater horizons, venturing into the production of tread rubber a mere six years later.

The company's dedication and commitment soon paid off, propelling MRF to become a leader in tread rubber within India, boasting an impressive 50 per cent market share by 1956, as revealed on the company's website.

Recognising the need to expand its reach and capitalise on its growing success, MRF took a momentous step in 1961 by debuting in the public markets. Simultaneously, the company unveiled its inaugural tyre from a state-of-the-art pilot plant located in Tiruvottiyur. This pivotal move marked a turning point for MRF, opening up a world of possibilities and setting the stage for its journey.