Welcome to the world of “HoldCo Discount”.
Its is a prevalent feature of all such holding companies.
The reason I understand for such discounts are:
- Lack of Liquidity & control : Holding company seldom sell their investments. Thus it makes difficult for shareholders to unlock full realization.
- Complexity of valuing underlying asset: Complex reporting structures and multiple layers of subsidiaries make it difficult for investors to understand the business, often resulting in a discount.
Apart from KAMA Holding’s SRF investment there are many more examples like:
Tata Investment Corporation Limited (TICL): often trades at a significant discount to the market value of its holdings, which include major Tata group companies like TCS and Tata Motors.
Bajaj Holdings & Investment Limited: A well-known Indian holding company that often trades at a high discount compared to its investments.
Berkshire Hathaway: A global example where the company’s diverse portfolio of businesses and investments might be valued differently by the market than if they were separate entities. Generally it trades in the range of 10-20% discount.
You can try reading more about HOLDIN COMPANY DISCOUNTS & CONGLOMERATE DISOUNTS, to understand the concept indepth.