Aarati Krishnan of BusinessLine has come up with the bright idea by which investors can get a stake of Tata Motors, Tata Chemicals, Titan Industries, Tata Global Beverages and a hundred other stocks of leading companies at less than half their current market price. She advices investors to buy shares of Tata Investment Corporation (“TIC”), the investment arm of the Tata group. TIC owns minority stakes in several Tata and non-group companies. Its market price is Rs. 390 while the underlying investments are worth over Rs. 800 per share.
Aarati Krishnan points out that while it is usual for holding companies to trade at a 25-30 per cent discount to the market value of their investments (or net asset value), the discount of 52 per cent on the TIC stock is exceptionally high, both in relation to peers and historic levels.
She explains that there are three possible triggers that could unlock value for investors.
One, its holdings (blue chips like Tata Motors, Tata Chemicals, Titan Industries, Tata Global Beverages, Sun Pharma, Reliance, M&M, HDFC Bank etc) are doing extremely well. Their stock prices are going up and it will result in TIC’s stock price going up as well.
Second, there is a good chance that the dividend yield (already at 4%) can go up as the underlying companies show good results.
Third, there is the possibility, Aarati Krishnan says, that the Tata group will consider delisting the stock.
Tata Investment Corp’s steep discount to its intrinsic value offers an attractive investment opportunity for investors, Aarati Krishnan adds.