Bengal and Assam company- an undiscovered gem in small cap

Bengal and Assam (B&A) is the holding company of JK group (JK Lakshmi cement and JK
Tyres). The key share holders of B&A are Mr. Hari Shankar Singhania (31.04%
stake) and Dr Raghupati Singhania (10.63% stake) and promoter owns 73.96%
stake.

B&A is the biggest promoter share holder of JK lakshmi (24% holding), JK tyres (24%
holding), JK Papers (24% holding),Umang diary (45% holding), JK Agri Genetics
(22% holding) and JK Fenner (88% holding). B&A only listed in the Bombay stock
exchange.

Also B&A owns (either directly or through subsidiaries) in JK Lakshmi cements (40%
stake), JK tyres (44% stake) and JK papers (50% stake) and B&A also have
large parcel of real estates in urban areas which worth thousands of million
rupees.

Across the JK group, companies are witnessing big expansions are the JK Tyres (increase in radial tyre business and also leader in domestic radial CV tyres market- Market Cap is Rs 25 bn) and JK Lakshmi cement expansion in eastern and western region. With thecommissioning of new facilities at Durg, Odisha and Gujarat, the company is expected to have a standalone cement capacity of over 10.3 MT by the end of June’16. Considering capacity in place and economic recovery will boost the performance of the company, going forward. JK Lakshmi’s market CAP is Rs 38 bn.

Hidden gem company- JK Fenner (Auto ancillary company) is unlisted company in Rubber 2 Wheeler transmission used in scooters in domestic market. JK Fenner has business of ~ Rs 6 bn and has leading EBITDA margins of ~ 22%. In future, company has plans to enter in to the Industrial segment, Which is relatively high margin business. The consolidated book value of the JK fenner is Rs 1,740/share as on Mar’15. JK Fenner pays Rs 35/Share as dividend in FY15.

JK Agri Genetics, is a leading hybrid seed company engaged in R&D, production, processing and marketing of vegetables, cotton, Rice,Maize and Pearl Millets among others. Company has 10% Market share in the hybrid Rice. Company aims to double the revenue in next three years.

Umang Dairies is a dairy product of JK organisation. Key brands are White Magik, dairy top and Umang Ghee. In January, 2014, it launched its liquid milk in lucknow under the brand name JK Milk. Over the past 5 quarters, the average sales growth of Umang is over 30% and RoCE is well above 25%.

Considering current valuations of all the subsidiaries and holding company,
the net asset value of Bengal and Assam (B&A) is works out to be Rs 5,223/share.
At the current market price of Rs 540, Bengal &Assam currently trades at
big discount of 90% of its investment value. 52 weeks low/ high is Rs 450/ Rs 650.
Interestingly, consolidated P/E of B&A is just 2 times at current market
price. It is very interesting and unbelievable a holding company is available at
much discount.

Summary and Valuations:

3 Likes

I felt the same when I first came across this company.
The main concern people may have is company is not paying out taxes inspite of reporting profits.
NBFCs/Holding Companies trade at various bands of PEs from low single digit like this one to high 40s-50s . If there isn’t any trigger to change the perception of the company it can remain in low PE for a long time.
Cement, Tyre, Auto Ancillary industries have corrected over past 1 years so has this company too and may start resonating soon with their boom.

Disc: small position taken with less than 1% of portfolio

Low taxes because most part of the income is dividends from group companies and are exempt from tax

1 Like

Several investment companies STEL Holdings , Summit Securities (RPG ) also trades at 90% discount to their holdings. No surprise in that…
Sometime back received analysis in this counter. a portion of the same here, i advise investors to dig deeper into the company before putting the eggs.

This company started in 1948 and no special business for itself, They will give peanuts as dividend.

“The manner in which this company takes in monies, and lends money is a study in opaqueness. Why it needs to borrow monies in the first place is very unclear. But let that be. At year end it had borrowings to the tune of Rs 926 m. This includes unsecured loans of Rs 760 m from bodies corporate, and another Rs 69.5 m from SASF (what this stands for is not known). The Rs 760 m includes an interest free handout of Rs 600 m at that, while another Rs 160 m was care of a subsidiary company - in all probability Fenner India. (The company seems to have several deals going simultaneously with its subsidiary Fenner India.) The only other subsidiary ‘bright enough’ to extend a loan is BMF Investments. BMF, which became a subsidiary in September 2009, has in turn extended a gratis of Rs 192 m (a part of the Rs 600 m), which is shown under a separate schedule called ‘Payable to’. Why would BMF Investments, an investment company, want to advance interest free monies to the parent investment company when the latter has no specific need for the money? Separately, it has also availed of a loan of Rs 65 m from Kotak Mahindra Bank. It will be very illuminating to know the names of the other suckers besides BMF who were cajoled into advancing an interest free loan of Rs 600 m (previous year Rs 630 m), and that too to a company which did nothing in particular with the money that it received. There is definitely some sort of a quid pro quo going on here.”

3 Likes

Lending money to needy group companies is the job of group holding company
It is not the extent of discount , what we should see is the underlying assets the holding company has ,future of the underlying assets etc
One should see the future potential of fenner,jk Lakshmi etc where this company has substantial holding
Under the new companies act the transactions which are not at arms length requires minority share holders approval

1 Like

Disclosure: I have small holdings (less than 1%) in this company.

Has anyone looked into the ongoing merger of BACL, Florence Investech, JK Fenner and BMF investments?

No. I would like to know an update view on this share. Thanks so much

Disc: Not Invested because I don’t know how to evaluate.

Anyone tracking this, please update. Lot of fundamentals had been changed Since the merger with Florence & BMF Investment has been get concluded.
Annual Report for FY19 enclosed.
Explore , it’s a undervalued bet for time being now.5330950319.pdf (1.5 MB)

This share has been moving up strongly recently…The big uncertainty is how much their unquoted investment in JK Fenner is worth? The rest of the portfolio I think is worth approx present market cap but JK Fenner would be worth many multiples of that…

Anyone have any ideas ?