SPOT THE MILLIONAIRE: Well, they all are, thanks to Wipro

At first sight, there's nothing remarkable about Amalner. It is a small dusty town (pop: 100,000) in a country that has more than a fair share of small dusty towns. It lies 350 km north-east of Mumbai and 300 km north of Pune, but although it is on the main railway line headed east from Mumbai, no fast trains stop here. The nearest national highway is 35 km away and Amalner does not have an airport (the nearest airport is 190 km away). There is nothing to say that this town is special: no visible signs of prosperity such as a profusion of Mercedes Benzs (come to think of it, Amalner doesn't have too many cars) or luxurious homesteads. Fine, the local branch of State Bank of India has a spanking new Automated Teller Machine, but ATMs are now a fairly common sight in India, even in towns like Amalner. All of which is surprising, because Amalner is a very special little town.

It is special because it has a lot of rich people-not people who have become rich from agriculture or industry, but from equity. And the town and its people have one man to thank for it.

The man was Mohammad Hussain Premji and in 1945 he founded Western India Vegetable Products Limited in Amalner and put down a factory to manufacture vanaspati, a kind of cooking grease. The factory wasn't a big one (its capacity was a few tonnes a day), but the townspeople believed in it. Some of them were given shares in the company by Mohammad Seth (as they refer to him even today). Some others like tobacconist Massom Shaikh bought some shares because Mohammad Seth was a customer. In all, according to some estimates, around 500 of the town's inhabitants, either bought shares or were issued them.

SMOKESTACK WEALTH: The Wipro factory, circa 1945, was and is Amalner's largest industrial establishment

Western India Vegetable Products Limited was to become Western India Products and eventually Wipro. And while it might be more famous for its software business, Wipro still makes vanaspati (and now toilet soap too) at Amalner. It's most famous product as far as the town is concerned, however, is millionaires.

Equitable Growth

The thing about equity is that no other asset class can match it, in terms of growth, over the long-term. The five shares (face value: Rs 100) that Masoom Sheikh bought in 1949 have become 350,000 (face value: Rs 2) today. The original Rs 500 investment is now worth around Rs 15 crore. Yet, Shaikh's family (the man himself is dead) hasn't moved out of its house in a crowded lane, does not own a car, and one son works at the Wipro plant at a salary of Rs 9,000 a month. "We had to sell some shares to renovate the house, but we do not touch them now," says Manzoor Shaikh, another son who adds that the family now lives off the dividend (over Rs 10 lakh in 2005-06). "We are grateful that Azim Seth (Premji) has taken the company where he has." Azim Premji hasn't visited Amalner, where he spent some part of his childhood, for over a decade.

Buoyed by the performance of their Wipro shares, some five years ago, the Shaikhs bought a few hundred Infosys shares. "If one flower smells so nice, you make a garland out of similar flowers," says Manzoor Shaikh, explaining the logic behind the buy. Ironically, this family that believes in it doesn't have a PC at home.

INVESTMENT MANTRA: Once a Wipro employee, Khanderia now feeds off Amalner's equity culture

Several families from the town, all early investors in Wipro, have moved out and on, but the appreciation in net worth they have seen, and the returns they earn (through dividend) has inspired other Amalner residents to look at equity. Not surprisingly, this town of 100,000 boasts three trading stations, an estimated 5,000 demat accounts and, at last count, at least 1,000 investors who own over 10,000 shares of several companies. The preferred sectors: it and fast moving consumer goods, both of which can be easily explained using the Wipro connection. Satish Khanderia, who runs online brokerage ShareKhan's trading terminal in town, and is a former Wipro employee, believes that Amalner's residents are not traders but investors in the true sense of the word. "This is not a historical day-trading town, even though with the internet some people are doing that," he says. "(These) people are long-term investors". Indeed, one popular saying at Amalner is that if you buy 10 shares of Wipro the day your child is born, it will earn enough over the years to pay for the child's higher education or marriage.

The Equity Bug

Most of the town's residents and almost all of the 400 Wipro employees based here have been bitten by the equity bug. N.K. Salati, Works Manager at the Wipro factory, has been in Amalner since 1977 and started investing in stocks when he saw that most of his seniors and several of his juniors in the company were doing the same. "I am what you'd call a long-term investor," he says half-apologetically, "and because this factory makes soap, you could say that I understand the FMCG sector." Salati has invested in some FMCG stocks as indeed have most other investors in Amalner. Hindustan Lever Limited and Colgate Palmolive are referred to almost fondly by some residents. "You have to remember that other than the factory, this town doesn't have much going for it," adds Umesh Anand, a former manager at Wipro's Amalner factory who now lives in Pune, proffering another reason for the equity culture in town. Another long-time resident and investor Harshad Joshi believes that Amalner's people have sworn off mutual funds after a bad experience or two in the 1990s. "How do I know what fund managers do with my money?" he asks. "I would rather invest it myself."

EQUITY FANS, ALL: Most Wipro employees at Amalner have significant equity investments

That may be easy to do in this age of online trading and instant access, but Amalner's residents weren't always on the grid. Information would come from the day's papers which would reach Amalner in the afternoon. "Some of us would gather for a chat in the evening and decide where to put our money," says Sunil Maheshwari, who is believed to be Amalner's first broker. "We have always followed one guideline," he adds. "We invest only in reputable companies; if we are lucky we get allotments during the public offering and if we do not, we buy from the secondary market."

Diversifying Risk

FOR FMCG: Works Manager Salati claims his work has helped him understand the FMCG business

Savvy investors that they are, Amalner's residents are also diversifying into other asset classes. One such is commodities. Khanderia recently invested in user-accounts for NCDEX and MCX, India's largest commodity exchanges. "Some of my customers are moving towards commodities," he says. "There are some people here who have made a lot of money during the recent run on commodities." And with stock prices soaring, some Amalner residents have overcome the town's distaste for mutual funds and invested in them.

On the day this writer was visiting (June 7) the BSE Sensex plummeted by 200 points, but the mood at Amalner was far from somber, although Khanderia claims that the small crowd that used to stand outside his office and cheer the market's march to 12,000 and beyond has disappeared. "Most of us are long-term investors," smiles Anand, offering an explanation. "With splits, bonuses, and dividends, you make money." That's a sound strategy for these volatile times.