Summit securities holding company of RPG group at discounted among holding companies

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                      SUMMIT SECURITIES

CEAT, ZENSAR, KEC, RPGLIFE’S holding company Summit Securities trading at 88% Discount to its quoted holdings in group companies

RPG – Harsh Goenka group is fast growing business group in India. its presence in Tyres ( CEAT), Information Technology ( ZENSAR), Power & Transmission (KEC) , Pharma ( RPG Lifesciencea), Hospitality ( Spencer international hotels) doing very well in all sectors from couple of years

About Summit Securities :

Summit securities is a holding company of RPG –Harsh goenka Group. It created in 2009 by amalgamation of group various investment companies CHI Investments, Summit Sec, Octave Investments, Brabourne Ent and RPG Itochu Finance
At that time CHI investments. Summit securities,octav investments,Brabourne Ent are pure quoted holding companies of group shres with market cap around 600 cr merged with un quoted company of RPG Itachu Finance which holds 50% stake in spencer international hotels.( Spencer Hotels has three five star hotel properties in Chennai, Bangalore and Ooty. All of them are managed by the Indian Hotels Co. Ltd, a Tata group firm, which runs hotels under the Taj brand. ) valued 600cr . The valuations were carried out by auditing firm Grant Thornton.

Summit securities holds below quoted shares along with its 100% subsidiary Instant Holdings
Company name Qty mkt price Value (in Cr)
CEAT 12469937 1038 1294
ZENSAR TECH 8192495 1092 895
KEC INTL 44307003 150 666
RPG LIFE 4501767 300 135
HARR. MAL. 2353350 60 15
STEL 2353350 36 9
SAREGAMA 253444 342 9

total quoted holding value 3023 CRORES
Today quoted holdings value 3000+ crore and un quoted hotels property value 500cr total 3500 crore liquid asset company available at market cap of 350cr ( cmp 326 * 1.09 cr total shares) means 90% discount to actual value and 88% discount to its quoted holdings.

Pros : > Market value of quoted investments 3023 Cr is morethan its market cap. of 350 cr. trading at 88% discount to quoted holdings
Company is virtually debit free
Trading at 0.7 times to its book value
Company has good profit growth of 49% in last 5 yrs
Company increased its stake in CEAT,ZENSAR,KEC with dividend income of group companies in last 5 years.
Promoter holding 73% with out any pledge.
Cons : Though company not paying dividend

Compare with other Reputed Leading holding companies :

Company holdings value market cap Discount

JSW holdings 1820 1093 40%

Bengal & 1780 464 66%
Assam

Pilani Investments 4900 1070 78%

kalyani 3196 681 79%
Invest.

Summit 3043 358 88%
Securities

Conclusion : Summit securities available at attractive valuations compare to other reputed holding companies trading between 40 – 80% discount to its quoted holdings valuations . but summit securities available at attractive valuation of 88% discount

Disc: i am accumulation shares from last 1 year, holds 2100 shares and still accumulating.

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Holding companies are designed to run with huge and very huge discounts.These companies will trade with discount to book value, promoters holding will be as high as 80%, debt free and don’t generate any operational money,

These companies will attract retail investors in the end of bull market when all other companies run high. :smile:

Personally I have lot so much during the past 12 years on holding companies. With no dividends, the only way to get money is liquidation when it happens.

Avoid.

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Hi,

From which source do you refer holding figures(Annual report?). I see number of shares for zensar as 79,70,395 whereas figure you mentioned is different.

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As per share holding pattern as on 30sep2015
Summit securities + instant holdings

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Normally these holding companies will not have any other income other than dividend from the companies they hold. As the companies pay the dividend distribution tax, so the holding companies are not going to pay any taxes.
Guys please correct me if I am wrong.
Disclosure: I am not holding any shares.

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@ysreddy30 you are absolutely right. Another annoying point is that most of these holding companies don’t distribute even the dividend they do get from their investments. For instance in this case it Summit were to distribute the annual dividend we would get a nice tax free return of 5% plus per annum. But as I observe in this specific case, the discount is actually quite attractive.

I made the mistake of passing on this deep discount in PTL enterprise. Corporate governance was also another reason I passed the opportunity. The stock has almost doubled in the last 6 months when I looked at it, but is still at a minimum 50% discount to intrinsic value.

This apparently seems to be an even better opportunity. That being said, one needs to have a very long holding period in these investment views.

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PTL enterprises is have corporate hospital apart from investments
I hold some shares in that from last year

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Another interesting idea in the same space is STEL holdings, almost a little brother to Summit Securities. Also, from Goenka stable. Roughly 80% discount to market price of holdings.

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Thanks @thotapathi . I have 10% of my holdings in Summit sec now.
Bought-in before today’s upmove., right after you opened a new topic on this.

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Anyone still following this company? EPS 45, CEAT has run up quite a bit, but this one is still available at a huge discount. PE 10 for a holding company.

DISCL: invested

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Is anyone here tracking Summit Securities or STEL holding? I have few queries.

  1. It is reported on MMB that these two companies hold SPENCER’s shares. Taking a clue from D-mart IPO, Spencers might come up with IPO soon. This will result in value unlocking.

  2. In general, I found that holding companies are available on discount. Sometimes to the extent of 70-80%. One of the reasons to this was answered in an article. Excerpt below.

"This gap in the valuation and discount occurs because financial data of companies owned by holding firms is not available if it is not listed. In addition, there are no consolidated financial details, says Vanvari. The discount will go away once the latest International Financial Reporting Standards, which require disclosure of consolidated financials, are adopted in India

Is there any other reason that holding companies trade in discount than above?

  1. Where can I find the details of companies (listed/unlisted) held by the holding companies?

And below is a recent article on the holding company.

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My sense is that the discount to NAV for a holding company is a given. The discount tends to reduce in a bull market & increases in the bear market. So you should be really sure as to which side the market is heading in the next 3-5 years.

Apart from the discount it is important to be convinced of the growth story of the underlying company. In case the discount does not change the holding company CAGR will mirror that of the underlying company.

In case once can find a holding company with a strong price growth of underlying stocks and a market with expanding PE’s and reducing discounts one would have a winner at hand.

I personally like BBTC(invested)

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The valuation of Summit Securities seems to be getting ridiculously low.I know that holding companies should trade at huge discounts because of their very nature but this seems stupidly low

As far as I can work out it has investments worth very very approx
2400 cr in CEAT
2400cr in KEC
1000cr in Zensar

So 5800 cr compared to their present market cap of 740 cr…

THESE FIGURES ARE CONSOLIDATED FIGURES BECAUSE THEY INCLUDE THE SHARES OWNED BY THEIR 100 PERCENT SUBSIDIARY INSTANT HOLDINGS…

I have been noticing that holding companies have been doing well recently.Even a sister company Stel share price has done well recently and now trades at more like 1/3 of book value.Also Nalwa and Bengal and Assam have been doing well.

Disc I bought some shares today.

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Seems quite a big RED FLAG

Subsidiaries

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I have taken number of shares Summit Securities hold in different companies from BSE website shareholding pattern for September 2022.

Prices for closing 13-Dec-22 from moneycontrol.com.

Our basic data does not match. Can you please re-check my calculations?

Screenshot from 2022-12-13 19-29-19

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Many apologies…I seem to have taken the consolidated holdings(which must include the shares that Instant Holdings own) as I took the figures from their last annual report …
The consolidated figures are
CEAT 12951508 SHARES
KEC 50312150 Shares
ZENSAR 44023802 Shares

I will correct my post above

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Hi thank you…can you explain exactly why you think this is a red flag ?

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NO RED FLAG

present holding value 6050 crores including its 100% subsidiary instant holdings.

zero debit company

un quoted holdings value 500 crores plus.

stock trading at 90% discount.

huge opportunity

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The auditor did not audit the subsidiaries where assets of 2780 Cr sits. this is a red flag in my book, many would like to ignore these things citing that every company has some governance issue.

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The balance sheet for 30 September indicates that the value of investments is Rs 5,426 crore compared to market cap of Rs 650 crore. Difficult to go wrong in this one.