Tata Investment Corporation: Unusual discount to NAV

Key points from Annual Report FY23:

1. The company keeps its promise of holding on to Tata group companies for the long run – Titan, Trent, Tata Consumer Products, Trent, Tata Chemicals etc. The only exception is Tata Elxsi where they trimmed the stake by 25% at sky high valuations (P/E of 80 to 100). This shows really high quality character of the management in terms being of being valuation conscious. To significantly trim the stake in a group company when the stock was a market darling is a positive sign. It could also be possible that they do not see Elxsi as a core holding as all other big group holdings are consumer plays. I personally align with the former statement.

2. Major Sells: Indusind Bank (approx 250-300 cr holding) plus a few other residual positions (Hero MotoCorp, Bank of Baroda, Ramco, Colgate etc).

3. Major Buys: The company has bought a basket of high dividend yield stocks trading at a cheap valuation – Castrol, Redington, GAIL, Power Finance Corp, PowerGrid Corporation of India, REC, LIC (more of an asset play) and a few others (Kotak Bank, Zomato, D Mart etc). The idea here is pretty clear – not hold cash and keep buying stocks whenever market gives opportunity. The major problem here is most of these positions are below 0.50% weightage, some positions are as tiny as 0.05%. I don’t see anything meaningful happening here.

4. Around 85% of all assets are in Tata group stocks. The majority of returns will come from here. At the same time, you can not ignore a few potential dark horses – NSE, Tata Capital and Tata Asset Management.

Disclosure: Not invested, tracking with increased conviction.