How to do Valuation of Holding companies?


(yourraj) #1

This is regrad to Valuation of Holding company’s shares i have several doubt and concerns in my mnd .I am just starting a thread so that to learn more throgh colloborating leraning and with the expereince of Value contributors .

A holding company: A holding company typically does not have ongoing operations other than the retention and management of assets in anticipation of future sale or trade

How to value a holding company such as Balmer Lawrie Investments or similar?
What will be the growth prospects or such holding companies?
They are mostly being high dividend giving companies and always available at discount.
The thing which attract is as their investments were more than their market capitalisations.
I need Vp’s help from the experts Is it safe to invest in such companies

Point in favour
• They don’t have any sales eventually not paying tax . only tax they have to pay is dividend distribution tax .
• There is low cost of operation only employee cost .
• OPM is >90%
• Dividend pay-out >75 average last 10 years
• In Indian scenario the holding companies are in the range of 25 to 70% discount rate , if you compare the value of the holding shares by the company
The best part they purelly financial vehicals

A few companies
• Balmer Lawrie Investments
• Kama Holdings Limited
• Tata Investment Corp
• Bajaj Holdings and Investment
• Jindal South West Holdings
• Rane Holdings
• Pilani Investment

Risks
• Inherent risk of possessed equities passed on to the holding company

it offer better return than most of the mutual funds and index returns but i am not able to find the Missing link That How to Value a holding comapny ? I need your help :sunglasses:

Regards

Ref 1 http://www.balmerlawrie.com/files/1504261982annual_report_2016-17.pdf
2 screener.in
3 https://www.businesstoday.in/moneytoday/stocks/invest-shares-holding-companies-stock-market/story/21884.html
4 regarding valuation discounts : https://www.sagefa.com/forensic-accounting-articles/valuation-discounts-for-holding-companies

Disc; Not having any stock owned I am not an analyst and this is not any investment advice .one may find their own rational to invest in the stock mentioned in the post. This is for study purpose


(Gothamcapital) #2

There is no real way to estimate the discount.The fact is sometimes the discount is even higher,almost 90 percent discount.In 2013 some of the investment companies were trading at a market cap of 1/10 th the value of the investments.

Most of the experts however believe the discount should be in the range of 40 to 70 percent.