Bombay Burmah Trading Corp(BBTC): Is this really cheap?

Bombay Burmah Trading Corp(BBTC) is a holding company for Britannia and other companies of Wadis. Per the article given below, BBTC holds ~ 50% in Britannia. Current Britannia's market cap is around 32,000 cr. Where as BBTC's market cap is around 3400 cr. Wondering reasons for this mismatch. If BBTC holds 50% of Britannia, market cap should come close to 16000 cr... right? Is this really available at such a low valuation? Wondering if there is any catch?

I'd appreciate if someone can shed some light.

https://www.moneycontrol.com/news/c...es-at-85-discount-to-investments_1137803.html

 

Usually the holding companies of large groups do trade at a discount. You can wonder about the valuation of the company with respect to it's holding of Britannia stock. But the fact of the matter is that you have to realize that these are promoter owner holding companies and just because BBTC owns 16000 crs of Britannia shares it is not going to sell those shares and distribute the earnings to it's shareholders. It has been holding them since many years and would continue to do so. The major revenue of these holding companies is primary the dividend income that they get from their stock holding. They can either keep it with themselves or distribute a part of it to their shareholders. You can argue that the mismatch is huge and stock might move up but when does that happens nobody knows. It can take 3 months or maybe 3 years or even more. But you should always note that there will always be a valuation discount of a pure holding company. For more information you could refer to these links or do a google search for Holding companies discount

https://www.sagefa.com/articles/Valuation Dicounts for Holding Companies.pdf

https://corporatevaluations.in/newHolding_company.html

 

Stock guru I have one doubt for a company iam tracking the promoter holding is 58% and in public holding two entities holding 17% with same address and for me it looks like promoter is holding thru this entities is to overcome the sebi regulations if so if the promoter is willing to hold that high why not directly is it a good sign or something to be alarmed about.

 

Thanks @Meenakshi Razdan for the links and excerpts. I came to know about other holding companies and their discounts. I will take a look at Tata Investment Corp.

Thanks @stockguru for sending the links on research angle. I came to know about following discounts .
" When valuing holding companies an appraiser will typically consider four basic types of discounts: a liquidation discount, a discount for lack of control, a discount for lack of marketability, and a cotenancy discount "

Since BBTC is trading at 70-80% discount, I would like to dig little deep. It seems the typical discount is 40-60%(based on the link sent by @stockguru). So, BBTC seems to trade at more discount to other holding companies (is it really so?). Why it is so? Is it because of reputation of Wadia's or any other liabilities? Also, wondering if there are any research reports on BBTC. Would like to understand their liabilities and would love to see their valuation based on "Sum of Parts".

Another angle is ...BBTC holds GoAir. Read somewhere that GoAir is also going for listing and wondering how much value it unlocks. It is a profitable Airlines. I think Indigo is getting listed at ~25K cr valuation and SpiceJet is valued at ~1K cr. I am guesstimating that, Go Air could be valued between 1K -7K cr (9% market share is 1/4 of Indigo's-37% )...

Thanks for taking time and responding to my questions. This definitely expanded my horizons.