Tata Investment Corporation (TIC) - NBFC type of business - buys and sells equity, with a self declared long term focus: also holding company kind of structure and holds shares of Tata Group companies.
- the strategic holdings are unlikely ever to be realised completely due to the holding structure
- holds an array of companies and receives dividends from them and also makes money when they sell those shares
- regularly declares their Net Asses Value (NAV) based on the value of their holding- (details on their website)
-Similarity to a mutual fund, is noted.
Rationale for investment
- The share price always has a discount to NAV
- long term share price discount to NAV is around 40% over last many years.
- during the financial crisis the discount to NAV went up to around 58-60%
- current NAV (Dec15) is 1295
- at the share price of 500, this is a discount of 60-61%
- the possibility of the discount to NAV returning to usual baseline or reducing from current levels - is reasonably high
- Downside is likely limited, but the upside is more than the risk of significant decline.
-are things as bad as financial crisis now- doesnt look like it
- is the current NAV likely to be higher than 1295 - likely, the way the market has gone up (guess on my part)
Can the discount continue to widen further, to lets say 70% of NAV , of course it can/ may- but there has been no precedence in recent years as far as I can find.
- When will the discount to NAV return to mean- I dont know, may take a while; Can get 3.5% dividend, while you wait ;
-What could trigger the discount to NAV return to mean- I dont know (usual claims of delisting etc, are not clear or predictable): the low share price or huge discount might itself be a trigger
- Is it for a very long term investment - I doubt it with complicated structure, issuing of warrants etc and equity dilution, fairly static dividend payout for last few years, not a stellar growth story or anything; I doubt its the kind of stock that you keep to send your kid to university. Have done their share of buying suzlon, satyam etc in the past and selling huge pile of Eicher motors shares in ?2009 (If only !!)
- The NAV can come crashing if the market crashes; but looking at the last many years, its not usually a dramatic drop in NAV, but a slower one than the market drop.
Declaration: I am a novice and have no finance background at all- so please go slow if the above is way off the mark and not according to VP standards