Agree. Management’s primary objective is to manage the portfolio as best they can. However, as your table clearly showed, the discount has been increasing year on year over the past decade and will continue to do so since dividend returns are no longer attractive, with the current tax treatment. Companies routinely intervene when underlying fundamentals are not reflected in the stock price, else we wouldn’t have buybacks as an instrument at all. Stock splits, attracting passive flows via ETF’s, hosting investor calls etc, there’s a lot that the company can do, if it wants to.
Let’s all hope for a magical 2008esque move to a premium, that would truly result in substantial shareholder wealth creation!
I am curious that why in first place TIC is a listed entity then? As its purpose is majorly holding structure of Tata group companies, what is the need for Tatas to have it listed?
Correct, probably because market is very very smart in most occasions and it knows already that such buybacks may not happen regularly or even intermittently.
As you yourself mentioned that you are buy and hold investor, would such peak matter for cases like us (I consider myself also long term hold player), if ultimately the discount comes back to earlier large figure…as we may not sell at peak…unless you decide to sell…
Disc: Not invested but interested. Very closely tracking
On 1, good question Looking at the way the discount has widened from 30-35% to 65-70% over the past decade, a lot of investors would be asking the same question. They might as well delist at NAV, at least shareholders will have a decent exit.
On 2, spot on. Markets have figured that buybacks aren’t going to happen frequently enough to have a sustained bearing on the discount and hence the continued and widening discount. With the Chairman stating at the recent AGM that they are not in favour of further buybacks, that window is now truly and firmly shut.
On 3, while it would ordinarily not matter to long term investors, my worry is the complete lack of interest from the Board of even trying to find ways to lower the discount on a sustained basis. As a long term shareholder, I want to be convinced that the Board isn’t disconnected from its primary purpose of creating value for all shareholders. As things stand today, since it really doesn’t matter to the promoter if the discount is 10% or 90%, the interests of the minority shareholder and the promoter are not aligned.
Since buybacks are essentially ruled out now, the other steps possible to address this discount on a sustained basis are:
Stock split to enhance liquidity and
Attract passive funds - ESG focussed funds, Dividend yield funds and small cap ETF’s. This can be a game changer if addressed with seriousness since it will bring a lot of passive, regular flows into the stock and help narrow the discount meaningfully over time, given the low float.
For now, one continues to live in hope that the Board wakes up from its deep slumber. Results on the 9th and the reported NAV is likely to be somewhere between Rs 3000-3200.
Tata Investment is narrowing its discount … Though even now the discount is 60% +
The return has been Capital CAGR return 22% over 7 years + with 5% + dividend Yield ( updated my post dated July 6th )
Underlying assets ie NAV CAGR is 26%++ over last 7 years so stock price still has some steam .
Even if it has to reach 2014 NAV discount level of 38% then stock price has to go up by another 60% …
Pre 2008 … TATA investment had also traded at premium to NAV which is difficult but not impossible
I think intention of TIC looks very clear. Apart from holding, they want to cash out from group companies in form of dividend. So I feel minority investor should invest if they also looking for steady stream of dividends. That way there will be alignment for both. People who have invested since long are getting good cash flow.
Simply Great.
Thanks for sharing. I was searching for the same since LONG TIME.
Any idea has the discount increased or decreased post COVID run up in all TATA groups shares?
Tata sons is unquoted, I am not aware of the actual share value at present, also unable to find a good source to get present value of unquoted shares. So, I just took as it is from annual report. (AR 2021- Page 92.)
it has to be worth more than 59k… of course, this doesn’t affect TIC valuation overall as they have just 326 shares of Tata sons which is very small weight.
Tata sons Total equity shares 404,146 (Face value ₹10,000 each)
(Tata Sons - Wikipedia)
As per corporate shareholdings filed for September 30, 2021, publicly holds 15 stocks with a net worth of over Rs. 1,243,771.8 Cr (Source trendlyne.com )
So per share Nav comes approx
3 crores of listed companies only.
Looking at the way the discount has widened from 30-35% to 65-70% over the past decade, a lot of investors would be asking the same question. They might as well delist at NAV, at least shareholders will have a decent exit.