Why MRF Share Is So Costly?

27 March is the day when Chennai based tire manufacturer company MRF share price crossed 60000. But everyone wants to know why MRF share is so costly?

If you look back some time then you will find that the price of 1 share of MRF tire is 10,000 rupees.

At that time I talked to my friend and said to them That Do you know how much MRF one share worth? It is so costly.

MRF 1 shares cost 10000 rupees.

How can a share worth 10000 rupees?

I am definitely sure that It will not increase again. At that time I also not much familiar with investing.

And I judge share by the price that this share is costly or not.

Why MRF share is so costly

And I am sure where 1 share of Maruti costs around 6-7k rupees, Ashok Leyland 1 share price 70-80 price, Tata motors 1 share price is around 180 rupees then 1 share of MRF worth 60-70k looks costly, It’s obvious.

MRF share price

Let’s know all the truth about it-

But before that Do you know how much worth Warren Buffet’s company Barkshare Hathway is?

Let’ guess, 100k…. 500k…. 1M….. 5M…. no. It’s worth $3,33,860.00 wait it’s in USD. If we convert it into Indian rupee it will be around 2.3 Crore rupees.

Berkshire Hathway share price

Yes, It is more than 2 crore rupees. It means if you want to buy 1 share of Berkshire Hathway then you have to give more than 2 crore rupees. So is this share is very costly? Is this share overvalued?

So why some stocks like MRF, Page Industries or Berkshire Hathway share so much costly?

You might like this: 5 Tips to Get a Higher Return in the Stock Market

We will know all the truth of these overvalued stocks’ total truth.

Parts Vs Value

Suppose you want to buy a plot or piece of land. There is two plot is the same colony. One is 1000 square feet and the other one is 4000 feet if the first one’s worth is 1M and the other’s worth is 4M.

Then it’s reasonable that both the plots are in the same are but the area is different so that the price is also different.

But if someone doesn’t have full knowledge then one plot may seem costly and others may seem less costly.

But the truth is one plot is 1000 square foot and the other one is 4 times bigger than the first one.

If we analyze then we will find that both the plots have equal value, but one lot is bigger than another that’s why one is more costly.

In the same way, you can understand Ashok Layland as a small plot and MRF as a bigger one. It means in the starting you have to give more money but in return, you will get more part in the company.

MRF didn’t do many fractions in their company.

Let’s understand with another example. Let’s assume there is a Pizza and the price of the pizza is 300 rupees. You can also order a slice of pizza. That slice will worth 50 rupees.

So the pizza is the same but the price of pizza’s slice is varying with the size of the slice. And if you make 10 slices of that same pizza then you will get one slice for 30 rupees.

But it doesn’t mean that pizza is cheap. One slice of the pizza is cheap because no slices are more. It simply means that you share it if reduced.

Division of Shares

Let me tell you in a very simple manner. Let’s assume there are two companies. The share price of both companies is 100 rupees. After some time one company divide them into 10 shares of 10 rupees. And another company divides them into 100 shares of 1 rupee.

Now assume that after one year both the companies got 200 rupees profit. Then here’s some calculation

In company A if you have 1 share of the company then you are the owner of 10% of the company.

So if the company got 200 rupees then you will get 10 of that profit it means you will get 20 rupees.

But if you have 1 share of the company then you are the owner of only 1% of the company and you will get only 1% of the profit and you will get 2 rupees.

Is MRF A Cheap Share?

See MRF share is as much costly that not every person who is investing in the stock market can not afford even one share of the MRF.

Then how can it be cheap?

And the most important question is why the MRF share is of so much high price.

Can Any Company Change Their Share Price

Yes, any company can change its share price by splitting their share. Any day MRF can say that our 1 share is now divided into 10 shares of 5500 rupees.

And this will not have any effect on the company valuation. Their number of shares will increase. And you can buy their share at 5500 rupees.

There are so many companies that use this technique to reduce their share price. You can see the example of the Infosys.

Infosys do this so many times. If they didn’t do that then their share price will be in lacks.

But they continue doing this. And now Infosys share price is around 70.

But there are so many companies out there who don’t like this method.  Like Warren Buffet’s company ‘Berkshire Hathway’ and Also MRF. They think this is not a good method to grow the company.

You might like this: Why YES Bank Share Price is Falling?

What is Stock Split

A stock split is one of the many corporate actions which companies may take if necessary.

In the stock split normally 1 share is divided into many stocks. The most common stock split ratios are 2-for-1 or 3-for-1.

It simply means that a stockholder which has 1 share will be 2 or 3 shares after the stock split with their respective ratios.

Benefit Of Stock Split

Now you may think that what is the benefit of the stock split. So I am giving some points which can explain to you some benefits of the stock split.

Liquidity

Liquidity is one of the most important benefits od stock split. A stock split increases liquidity which helps to increase the trading volume.

Affordable

Stock split also makes the share price affordable for the retail investors. If a company is trading at 5000 rupees and the company announces a 10:1 ratio stock split then the stock price will be 500 rupees after the stock split.

So which price is more affordable, Obviously 500.

Overall, In terms of value, it doesn’t reduce the value or financials of the company. But it increases the participation of the retail traders and investors also.

That’s all for this post. I hope this will be helpful to you to understand that why mrf share is so costly 🙂

Don’t forget to share this article with your friends and family and let me know in the comment section below how can I add more value to you guys?

Till next time guys… Good Bye 🙂

You might also like: What are Options in trading?

63 thoughts on “Why MRF Share Is So Costly?”

  1. Hi there would you mind stating which blog platform you’re using? I’m going to start my own blog in the near future but I’m having a hard time making a decision between BlogEngine/Wordpress/B2evolution and Drupal. The reason I ask is because your design and style seems different then most blogs and I’m looking for something completely unique. P.S Sorry for getting off-topic but I had to ask!

    Reply
    • Hello, I am using WordPress and I must say that this is one of very simple CMS out there. Honestly, I didn’t hear about BlogEngine & B2evolution. I am doing Blogging for a long time and if you are about to start your blogging journey then my advice for you is WordPress without a doubt. The reason why I am supporting WordPress that it is very easy to understand, you don’t have to give your precious time to learn it. Instead of you can give your time to create valuable content. I hope this will be helpful for you 🙂

      Reply
  2. obviously like your website but you need to test the spelling on quite a few of your posts. Several of them are rife with spelling issues and I find it very troublesome to tell the reality however I will certainly come back again.

    Reply
  3. Somebody necessarily lend a hand to make significantly posts I’d state. This is the very first time I frequented your web page and thus far? I surprised with the analysis you made to make this particular submit extraordinary. Magnificent task!

    Reply
  4. I’ve been surfing on-line greater than three hours lately, yet I by no means discovered any attention-grabbing article like yours. It’s pretty worth enough for me. Personally, if all web owners and bloggers made good content as you did, the internet will be much more helpful than ever before.

    Reply
  5. I?¦ve been exploring for a bit for any high-quality articles or blog posts in this sort of area . Exploring in Yahoo I eventually stumbled upon this website. Studying this information So i?¦m happy to exhibit that I’ve a very just right uncanny feeling I found out exactly what I needed. I so much indubitably will make sure to do not forget this website and give it a glance regularly.

    Reply
  6. Awesome blog! Is your theme custom made or did you download it from somewhere? A design like yours with a few simple adjustements would really make my blog stand out. Please let me know where you got your design. Many thanks

    Reply
  7. Good way of describing, and good piece of writing to take information on the topic of
    my presentation subject, which i am going to deliver in school.

    Reply
  8. you’re in reality a excellent webmaster.
    The site loading pace is amazing. It sort
    of feels that you are doing any unique trick. Furthermore,
    The contents are masterwork. you have done a fantastic process on this matter!

    Reply
    • Thank You Madalynn,
      I am very happy that you like my content. I am just trying to write content which helps people 🙂

      Reply
  9. The other day, while I was at work, my sister stole my
    apple ipad and tested to see if it can survive a thirty foot
    drop, just so she can be a youtube sensation. My iPad is now broken and she has 83 views.
    I know this is completely off topic but I had to share it with someone!

    Reply
    • Hello Aliana,
      Sorry for the iPad, but very happy for your sister.
      Just motivate her so that today’s 83 views can become 83 Million views 🙂

      Reply
  10. Hi, this weekend is fastidious in support of me, as this time i am reading this impressive educational
    piece of writing here at my residence.

    Reply
  11. Hello would you mind stating which blog platform you’re working
    with? I’m looking to start my own blog in the near future but I’m having a
    hard time choosing between BlogEngine/Wordpress/B2evolution and
    Drupal. The reason I ask is because your design seems different then most blogs and I’m looking for
    something completely unique.
    P.S Apologies for getting off-topic but I had to ask!

    Reply
    • Hello Keto,
      I am using WordPress and a premium theme. I used many platforms, but I found out that WordPress is the best platform for me.
      I suggest you try some platforms and see which is doing good for you.

      Reply
  12. I do agree with all the ideas you have presented in your post. They’re really convincing and will certainly work. Still, the posts are too short for beginners. Could you please extend them a bit from next time? Thanks for the post.

    Reply
    • Thank You Investment Advice for your advice, I will definitively keep this in mind while writing the next article 🙂

      Reply
  13. I for all time emailed this webpage post page to all my contacts, for the reason that if like
    to read it then my contacts will too.

    Reply
  14. Aw, this was a very nice post. Taking a few minutes and actual effort to generate a very good article… but what can I say… I
    hesitate a lot and don’t manage to get nearly anything
    done.

    Reply
  15. Hey There. I discovered your weblog using msn. That is a really smartly written article.
    I’ll make sure to bookmark it and come back to learn more of your
    useful info. Thank you for the post. I’ll definitely return.

    Reply

Leave a Comment