Why MRF Share Price Is So High? Secret Behind ₹1 Lakh Stock

Why MRF share price is so high?

The year 2023 is bombarded with numerous events and one of the most eye-catchy was MRF share price.-

“Indian MNC- Madras Rubber Company became the first company to hit the share price tag of Rs.1 lac”  

Even if you aren’t a market maven you would be aware of this news. Ever since ACE Equity released the data regarding the stocks with the highest price tags everyone was shocked except market mavens! Why? You may ask. Because they expected this scenario a long time ago. See, MRF’s share price has always been high. Even though it hit the massive mark this year, it wasn’t too far behind in the race. 

All these events boil down to one question- Why MRF price is so high?

Why MRF share price is so high?

There are not one or two but many reasons behind it. In this write-up, we will look into all the factors that led to the sky-high price of MRF shares. 

Let’s begin!

MRF share price history

If you are familiar with the Indian stock market then you might know that MRF would reach this target soon. It is the largest tire manufacturer in India with a market capitalization of Rs.43,196 crore. 

Look at the history of MRF’s share prices since its IPO-

Graph representing why MRF price is so high?

Decade 1: The year 1990 to 2000

The IPO price of MRF was Rs.350.00

YearMRF Share Price on NSEYOY (Year-Over-Year) Growth
Year 1990-2000: MRF Share Price on NSE

As you can see, MRF went through numerous ups and downs in the first decade after its IPO. MRF’s share price in 1990 was Rs.350.00. It debuted as a public company with a face value of Rs.10 per share. Eventually, it delivered outstanding returns to investors in consecutive decades. 

Was its second decade successful in terms of YOY growth? 

Let’s find out!

Decade 2: The year 2010 to 2020

YearMRF Share Price on NSEYOY (Year-Over-Year) Growth
Year 2001-2010: MRF Share Price on NSE

The company faced remarkable YOY growth in the second decade.

Decade 3: The year 2011 to 2020

YearMRF Share Price on NSEYOY (Year-Over-Year) Growth
Year 2011-2020: MRF Share Price on NSE

The 3rd decade proved to be a stepping stone for MRF to land on the list of the most expensive stocks in India.

Decade 4: The year 2021 to present (2023)

YearMRF Share Price on NSEYOY (Year-Over-Year) Growth
Year 2021-2023: MRF Share Price on NSE

Thus, MRF share prices touched Rs.1 lac in 2023.

Why MRF share price is so high?

As of now, you have seen the journey of MRF share prices for the last 40 years. Now it’s time to dive into “behind the scenes” of the whopping share prices of the company. We all know that the sky-high share price of MRF is quite a significant and remarkable achievement for the company. But it’s more important to understand the factors behind this success. 

Let’s look at the reasons one by one-

1. No Stock Split or Shareholding Dilution

No stock split in MRF

This is the most important reason for the high price of MRF shares. It never went for stock split or shareholding dilution. To the uninitiated let me explain the investment terms in simple words.

(1.1) Stock Split

Here, the company increases the number of its outstanding shares by issuing additional shares to its shareholders. But it maintains the total market capitalization of the company. When a company declares a stock split, the number of shares of that company increases, but the market capitalization remains the same. 

This means that the value of each individual share decreases proportionally, but the overall value of the investor’s holdings remains unchanged. Thus, the price of a stock falls after the stock split.

(1.2) Stock Dilution

In this process, the company issues additional stock to reduce the ownership portion of the current shareholder. How does it do it? By converting the shares into optional securities and secondary offerings.

MRF never had the intention of stock split and stock dilution which led to its high share prices.

2. Consistent Rise in Revenues

Consistent revenue rise in MRF

Take a moment and think- what does a consistent revenue rise of a company represent? It represents the seamless functioning and success of the company. Revenue & profits are the most crucial factor that earns the value of a company. 

Consistent revenue growth indicates that the company is generating more income from its business operations. And Investors view this as a positive signal. They have high hopes that the company will continue to grow and become profitable.

Before moving further, have a quick look at the revenue earned by MRF in the last 7 years-

YearRevenue Earned
2023Rs.23.261.20 crore
2022Rs.19,304.43 crore
2021Rs.16,128.58 crore 
2020Rs.16,321.64 crore
2019Rs.16,245.47 crore
2018Rs.15,104.40 crore
2017Rs.13,580.83 crore
MRF: Revenue Earned (2017-23)

As you can see, MRF’s revenue has continuously increased in the last seven years. The story is the same for the previous years too! The financials of MRF went through a purple patch since its IPO. Although it faced a few downfalls, you can’t deny the fact that its revenue & YOY growth was truly exceptional.

Coming back to the point of our discussion- the reasons behind high MRF share prices. The appealing revenue growth of MRF has won the trust of investors. Thus, it aided in the rise of its share prices.

3. Appealing Returns

Appealing ROI in MRF

The sales of MRF products have doubled in the last 10 years. Its CAGR (Compound Annual Growth Rate) was 6.5%.  Also, the steady growth of ESP (Earnings per share) by 30% from the last decade was highly appreciable. Look at the following data-

  • The Year 2013: Rs.1,336.16
  • The Year 2023: Rs.813.09

Also, the company maintained its operating margin at a healthy level. All these factors ensure appealing returns to investors.

Do you know what the most appealing return from MRF is? Dividend! MRF has never failed to pay significant dividends to investors over the years. This remarkable feature of MRF always catches the eyes of investors.

Can you guess the dividend it paid recently? Rs.169 per share! Yes, it’s true. Thus, it became one of the highest dividend-paying Indian companies. 

4. Brand Value & Dominant Position in Market

By now you have realized the fact that MRF dominates the tyre market in India. Do you know, India uses MRF’s products in the defense sector too? Let’s look at the market share of MRF in the following two segments-

Segment Market Share (%)
Market share of MRF in terms of production and revenue

The dominance in the market shares increased the brand value of the company. But how did MRF achieve this position? All thanks to its strong distribution network that helped it to establish a strong presence in the tyre market of India. The tyre sales contributed 73% of MRF’s overall revenue.

MRF Brand Value

Apart from that, MRF has sponsored the sports accessories of famous cricket players like Sachin Tendulkar. We all know how he ditched his MRF bat for Adidas.  We have described this whole saga in “Adidas & Indian Cricket Team.” You can look at it for more details. 

Also, it sponsors Formula 1 car tyres. All these moves enhance the brand image and reputation of MRF. Thus, it became the dominant player in the tyre industry.

Final Words

Now you must have realized the prime reasons for the sky-high prices of MRF shares. 

Also, the recent rise in MRF’s share price can be attributed to a bullish flag breakout, indicating a positive market sentiment and potential further upward movement in the stock price. This breakout has the potential to drive the stock towards ₹1.15 lakh levels. But you must not forget that nothing is permanent in the stock market. The scenario changes within a fraction of seconds. 

The coming days will determine whether MRF will be able to sustain its high share price or not!

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Published By: Supti Nandi
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