Holding Companies

Holding companies normally quote at a steep discount to the values of the stocks held by them. One can see this in all the holding companies such as Tata Investments, Bajaj Holdings, etc.

In another post, I had referred to a talk by Mr. Basant Maheshwari on whether one should buy holding companies or the underlying operational companies. He says:

"But, my argument is if you are bullish on the holding company, you have to be bullish on the underlying businesses and it is better to buy the underlying businesses. Betting blindly that the discount will narrow up and the discount will widen out, over a one-two quarter can make money, if I have some insider news that the company is going to restructure and things are going to happen. But over a long period of time, it doesn't make a lot of money."

There is also an interesting article in the Business Line on how if one buys Tata Investment Corp, one gets to participate in the fortunes of its subsidiaries like Tata Motors, Titan Industries, Tata Chemicals etc. The article says:

"The stock’s steep discount to its intrinsic value offers an attractive investment opportunity both for institutional investors and for the firm’s promoters. Should they peg up their stake, investors should see the stock price bridging the gap with the market value of its investment book."