7 Penny Stocks that Became Multibagger Stocks

Penny stocks are looked down upon by many investors. But there are penny stocks that turned out to multibagger stocks. Not just that, some of those penny stocks are now bluechip stocks!

You might not even know – some of the big names you hear now were actually penny stocks at some point in time.

Make no mistake, most of the time, penny stocks are a bad choice. In fact, penny stocks are penny stocks for a reason. Most of them are bad quality stocks. Only some are good. Spotting them is the key to grabbing a multibagger stock.

And before I proceed, let me tell, if you’ve never invested in any kind of stocks before, stay away from penny stocks. Explore investing in mutual funds instead.

In mutual funds, you basically outsource your stock investments to an expert. The expert is called a fund manager. He will manage your money and ensure you get good returns. This is in exchange for a small fee called the expense ratio.

Learn everything you want to learn about mutual funds here: Beginner’s Guide to Mutual Funds.

Here’s a list of bluechip stocks that were once penny stocks – but are really big and reputed stocks in the Indian stock market today.

1. Eicher Motors

Eicher share price: ₹23,124 (closing on 28th December 2018)

This company became big primarily because of its motorcycle brand Royal Enfield!

Everybody who invests in stocks talks about Eicher’s success story. Eicher happens to be one of the most popular multibagger stories in India these days. Today, the Eicher share price is hovering around ₹23,000.

Can you guess the price of one Eicher stock in 1998?

Around June 1998, the Eicher Motors stock was trading at around ₹9. Yes, ₹9.

In 20 years, this stock has grown nearly 2,555 times.

No wonder the Eicher Motors share is so popular. It is easily one of the most talked about stocks in the Indian share market. 

2. Kotak Mahindra Bank

Kotak Bank share price: ₹1241

This bank founded by the legendary banker Uday Kotak is now seen as one of the best banking stocks in the Indian share market.

But in its early days, things weren’t as rosy.

Till around September 2003, the Kotak Bank share price remained under ₹10. Sometimes even going as low as ₹1.8!

Anyway, 16 years later, this stock is trading around ₹1200. A huge step up. This is one of the best multibagger stock stories of India.

3. Lupin

Lupin share price: ₹840

This multibagger has come to become a pharmaceutical company of astronomical proportions. Lupin via its acquired companies is present in USA, Mexico and Latin America, Japan, Philipines, Australia, South Africa, and more!

Today, Lupin share trading at over ₹800 makes it hard to believe there was a time when this stock was trading at around ₹2 around 18 years ago!

Lupin has become especially famous because of the legendary investor Rakesh Jhunjhunwala’s investment in this company.

4. Titan

Titan share: ₹922

This Tata company which also owns the gold brand Tanishq is also famous for featuring in the portfolio of Rakesh Jhunjhunwala.

Titan stock price today is well over ₹922. But back in the year 2000, this multibagger stock saw lows as bad as ₹2.6!

Rakesh Jhunjhunwala is said to have made massive gains investing in the Titan Company.

5. Bajaj Finance (a subsidiary of Bajaj Finserv)

Bajaj Finance share price: ₹2634

It is a subsidiary of Bajaj Finserv. Bajaj Finserv recently was added to the Sensex index.

This company is an NBFC (Non-Banking Finance Company).

It focuses primarily on two and three wheeler loans.

It is hard to believe that this multibagger stock was a once penny stock and was trading at ₹2.8 per share in around 2000!

6. JSW Steel

JSW Steel share price: ₹298

India’s 2nd largest private steel company, JSW Steel has a presence in over 140 countries. In fact, it is one of the fastest growing companies in India.

It becomes hard then to digest the fact that this stock around the year 2000 saw share prices as low as ₹0.50! Yes, 50 paise! 

7. GRUH Finance

GRUH Finance share price: ₹312

This is another great penny stock turned mutlibagger stock story. Gujrat Rural Housing Finance Company Ltd (GRUH).

Gruh Finance provides financial services primarily for rural housing construction. GRUH Finance is a subsidiary of HDFC Ltd.

This stock was trading at around ₹1.5 in 2004.

What are They?

In the Indian stock market, penny stocks have no solid definition. In the US, a penny stock, as the name suggests is any stock that is trading below $1.

But in India, it is loosely accepted that any stock trading below ₹10 is a penny stock.

Which of them Should You Buy?

Which penny stocks to buy?

The above list and the astronomical returns must have really tempted you to go hunting for penny stocks to buy.

I understand the temptation. I spent a lot of time looking at penny stocks too.

But the reality is, penny stocks are penny stocks for a reason.

The chances of a penny stock doing well are actually very small.

So the chances of you picking up a penny stock that turns into a multibagger stock are extremely slim.

But that’s the point I am trying to tell you. Don’t take chances. The people who actually gained from penny stocks were investors who researched the stocks.

If you are not very confident about your research skills, stay away from penny stocks – it is almost certain you will lose money.

They didn’t take ‘chances’. Sure, if you’re investing in any stocks or shares, there is some luck/chance involved.

But the aim should be to reduce your exposure to chance and luck.

And that is what research does.

How to Invest in Them?

Buying penny stocks in India is done just as you would any other stock.

You need to have a trading account, a demat account, and bank account.

As mentioned before, there is no definition of penny stocks. In the eyes of the exchange, all stocks are just stocks.

However, you must note here, there’s the question of liquidity.

Some penny stocks are barely ever traded. This makes buying or selling them difficult.

Also, many times penny stocks are bought an sold away from the exchange in bulk deals.

Should You Invest in Them?

That depends.

Looking only at penny stocks to invest in is almost definitely a very bad idea.

But this is obviously not so simple.

How well do you think you are at understanding the sector? Can you read the company’s balances? How good a stock picker have you been in the past?

If you are a good investor otherwise, what you should do is keep your eyes open. If you come across a penny stock that looks promising, you could research and explore investing.

And let’s face it, not all multibagger stocks were penny stocks.

Don’t run after penny stocks.

Run after quality businesses. And then invest in those – whether they are penny stocks or otherwise.

Happy investing!

Disclaimer: the views expressed here are of the author and do not reflect those of Groww.