ValuePickr Forum

VLS Finance limited (511333)

in this very interesting point come is that company current mkt about 155 cr and market value of its investment including subsidiaries is almost 500 crore and it has the major share holding in relaxo footwear. so i think it is a debt free company and promoter continuing buying their share from open market

is we are missing anything in this please share your views

2 Likes

Npm only 0.10%?

Hi Hitesh

Was working on hidden asset plays when I found out this one, Absolutely no information is there on business and their methods of operations ,thier website is outdated

http://www.vlsfinance.com/index.htm

From what I could gather was they have relinquished their NBFC licence

However they hold about 14% of Relaxo footwears, Check page 37 of Annual report of 2014 or attachment

They have several other prominent holding

ACCELYA KALE SOLUTIONS LTD

BLISS GVS PHARMA LTD

CEAT LTD.

HT MEDIA LTD.

IFGL REFRACTORIES LTD.

IGARASHI MOTORS INDIA LTD.

TAMILNADU NEWSPRINT AND PAPERS LTD

Link to Annual report

This could be worth digging prima facie


Hi

Thank for reply NPM is 0.10%. i know but they have other liquid investment as per the latest AR 2014 which have current mkt about 730 crores and which NAV for this VLS per share comes arround Rs. 190 Per share.

So worth to digging more about

And now AMBIKA Cotton mills

http://www.vlsfinance.com/index.htm Link: http://www.vlsfinance.com/VLS%20Annual%20Report%2013-14.pdf

1 Like

http://www.vlsfinance.com/index.htm Link: http://www.vlsfinance.com/VLS%20Annual%20Report%2013-14.pdf

hI

i have studied last 5 year annual report and come to this conclusion thatthey have other liquid investment as per the latest AR 2014 which have current mkt about 730 crores and which NAV for this VLS per share comes arround Rs. 190 Per share.

Hi Hitesh

Was working on hidden asset plays when I found out this one, Absolutely no information is there on business and their methods of operations ,thier website is outdated

http://www.vlsfinance.com/index.htm Link: http://www.vlsfinance.com/index.htm

From what I could gather was they have relinquished their NBFC licence

However they hold about 14% of Relaxo footwears, Check page 37 of Annual report of 2014 or attachment

They have several other prominent holding

ACCELYA KALE SOLUTIONS LTD

BLISS GVS PHARMA LTD

CEAT LTD.

HT MEDIA LTD.

IFGL REFRACTORIES LTD.

IGARASHI MOTORS INDIA LTD.

TAMILNADU NEWSPRINT AND PAPERS LTD

Link to Annual report

http://www.vlsfinance.com/VLS%20Annual%20Report%2013-14.pdf Link: http://www.vlsfinance.com/VLS%20Annual%20Report%2013-14.pdf

This could be worth digging prima facie

thatthey

can u help me understand how did u arrive @ NAV 190 per share

http://www.vlsfinance.com/index.htm Link: http://www.vlsfinance.com/index.htm

http://www.vlsfinance.com/VLS%20Annual%20Report%2013-14.pdf Link: http://www.vlsfinance.com/VLS%20Annual%20Report%2013-14.pdf

hI

i have studied last 5 year annual report and come to this conclusion thatthey have other liquid investment as per the latest AR 2014 which have current mkt about 730 crores and which NAV for this VLS per share comes arround Rs. 190 Per share.

PLS FIND ATTACHED FILE

holding-value.xlsx (14.1 KB)

Relaxo AR also list LVS as shareholder with more then 5% equity.

Name of Shareholder Number of Shares held and % (2014) Number of Shares held and % (2013)

VLS Finance Limited 4528880 - 7.55% 905776 - 7.55%

VLS Securities Limited 4075000 - 6.79% 815000 - 6.79%

This stock has tracked Relaxo’ market performance Link: https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1428653520000&chddm=126476&chls=IntervalBasedLine&cmpto=NSE:VLSFINANCE&cmptdms=0&q=NSE:RELAXO&ntsp=0&ei=tWkpVeG8C57KugSC3oC4Cw in last 15 months.

in this very interesting point come is that company current mkt about 131 cr and market value of its investment including subsidiaries is almost 600 crore in only listed companies. and it has the major share holding in relaxo footwear. so i think it is a debt free company and promoter continuing buying their share from open market.

1 Like

Also they have unlisted investments at cost about 82 crores and current business is making profit about 2.5 crores annually after tax every year and company has not major debt.

Hi Hitesh/others,

I had a look at the portfolio from the attached spreadsheet. VLC Finance has holdings worth ~ Rs 800 crores. But this company is akin to a holding company. ( I am yet to look at the company’s B/S to see if they have any-other meaningful business model).

BBTC - Bombay Burmah Trading Corp. ltd) another listed holding company could be an apt comparison. BBTC has 50.75% in Britannia and 14.35% stake in Bombay Dyeing.

Britannia Stake(50.75%) is valued at 13,300 Crores, and Bombay Dyeing(14.35%) is valued at 191 crores(This is based on yesterday’s closing prices). BBTC has other assets in the form of real-estate in Mumbai and Tea and Coffee plantations. BBTC is available at a market cap of Rs. 2930 Crores. - This is roughly 1/6th of the market value of holdings.

Typically Mr. Market does not value holding companies at a higher valuation multiple.

)- This may be because, holding companies by themselves do not have any business model as such.

)- I have read somewhere that, a holding company should be valued based on the book value of the companies in it’s portfolio.

So, VLS Finance Ltd with its holdings valued at ~800 crores is available at a market cap Rs. 136 crores(again roughly 1/6th of its holdings).

78.76% of its holdings are in Relaxo Footwears. Having 80% of its portfolio in one company sounds risky to me.

To me it looks fairly valued, unless VLS has some meaningful business model other than the holdings that is covered in this thread.

What I might be missing in my above analysis:

A holding company is as good as the companies it holds. If Relaxo turns out to be a multi-bagger, VLS Finance might immensely benefit. Even then it will still be looked upon as a holding company and it will have a much lower multiple than Relaxo.

So the investor is banking on Relaxo’s stock performance here. But in this case then the question would be, then why not buy Relaxo directly from the market?

Does the company have an economic moat in the form of management’s superior investment skills. I do not know.

Experts, please correct me if you have different opinion on this or if I am missing something here.

Thanks,

Ravi S

Discl in above 3 stocks - VLS - No holdings, BBTC - No holdings, Relaxo - Invested (2.5% of my p/f).

2 Likes

Ravi - Key difference between BBTC and VLS is BBTC will likely to hold its stake forever as it is promoter, VLS is not promoter of Relaxo, So it can exit

Untill and unless it is holding Relaxo,Ambika others for strategic reasons (which I have not uncovered yet) the discount of being a holding compnay will not be steep as BBTC

Disc - Not invested digging more info on operations

1 Like

Vivek:

I am just trying to understand this better.

For a holding company, apart from dividends, is there any other source of income?

It could be from your capital gains from your holdings, and re-investing it in better opportunities. On that front, if you exclude Relaxo(to eliminate one off spike) from their portfolio, purely to understand their investment skills, they have made a absolute return of 134% on their holdings(dont know their holding period to understand CAGR). Are we considering this on their investment mgmt skills, if we consider this for long term?

Please let us know if you find anything on their operations.

Thanks in advance,

Ravi S

Holding companies have dividends as income, but is VLS really only a holding company ?
It’s websites lists that it is operating in NSE/BSE are trader and is also providing consultancy to corporates, Untill we dig more in operations we may not get to the right answer

1 Like

Hi Friends,

I have also been working on VLS finance for sometime and it does look interesting as its not a typical holding company (a holding co deserves significant discount as the investments might not get unlocked for years and hence money won’t flow to minority investors). They are holding big chunk of Relaxo as they were the underwriters during the IPO of the company and the public subscription didn’t come so they had to take the quantity for success of the IPO. Though it has to be appreciated that they could hold on to the investment for such a long period wherein the stock has been probably 100x in last 10 years. So a big thumbs up to the management for the same.

Other positives have been that the management did a buy-back earlier and has also been increasing stake by buying shares from open market.

Yes, as pointed above they are also invested in other cos where they have done well and value has been created. Also they have a 5 star hotel under litigation and if the outcome comes in their favour it could be a big bonus.

Interestingly a couple of days back, VLS has sold 5 lac shares of Relaxo - seems some start to value unlocking? :smiley:

Negatives/Risk:

  1. The value unlocking may take several years to happen - if so then the discount can be anything.
  2. The promoters don’t seem to be investor friendly - no dividend till today + things seem complex (too much of turnover and too little profits till now).

Disc: I’m invested

2 Likes

Hi Ayush,

Thanks for sharing your thoughts…

I have a cursory analysis and talked to two friends of mine in broking business in Delhi. I found both of them are aware of VLS / Relaxo story and the corresponding NAV of VLS but both sceptical about the management and their actual willingness to share anything with non-promoter shareholders. One comment was “it is a proprietary business but listed by mistake as public limited” :smile:

They have never paid dividend, their shareholding in VLS is less than 50%, even though in last two years it increased by about 5% to 6% to current 44% level, but what are their incentive to share asset with minority holders? They may keep investing in something or the other and the value unlocking may remain a chimera for long time to come.

From their website it seemed they picked Suven Life etc earlier (which they seemed to have offloaded) but never shared any thing with non-promoter majority. Don’t you think unless we meet the management, taking a leap of faith on this company is a bit risky.

If I go by promoter buying stock as an important criterion, then Cantabil Retail promoters have increased stake in company by almost 11% till date in last 25 months i.e. they bought upto the max permissible cap of 5% per year for last two yeas and same is done in first one month in April. Parallel to it business is improving gradually (I am invested, may be biased).

I brought the comparison for two reasons …

  1. amount spent by promoter to put his skin back in the game
  2. improvement in underlying business

In both these counts VLS is not doing anything great except sitting tight on some very good scrips.

The disputed court case with Sunair Hotel is very old but the write off would be Rs. 24 cr. as per AR 2014 data. It certainly no way diminish the current NAV of VLS significantly. So may not be material event for investment decision.

Overall I find it not a type of investment to my liking and temperament.

I may be missing something and ready to change my view with new insight / information / angle…

4 Likes

Hi Aveek,

Thanks for sharing your view and insights. Yes, the feedback on promoters hasn’t been good at the same time I have learned it the hard way to ignore opinions on promoter quality to some extent when the underlying business is going through a lot of change or good work is happening…cause at times the opinions are based on past incidence and in small caps we do see significant change in attitude of promoters once they reach a scale. Having said that, its very important to have these feedbacks and continue to keep them on mind and watchout for negatives.

I do give a lot of weightage to promoter buying and many often its the earliest indicator of something great happening :smiley: But just promoter buying is not everything…its just a pointer to get interested and do the homework. Our buying should happen only when we get a feel of the story and are convinced.

For VLS - we need to appreciate that the increase in value of their holding has been very swift and only in recent years. Till now they haven’t booked any much of profits. Its only a couple of days back that they have sold 5 lac shares of Relaxo after holding them for years. On the hotel investment - what I have heard is that the case is in final stages of SC and decision can come anytime and there is a high probability that it could be in the favor of VLS. If so, it could be a bonus.

Overall, yes, its a risky investment and not of the type we are used to and generally look forward to. However, at our end we like to seed such kind of ideas where deep undervaluation is there along with some catalysts. If things develop into better then we increase our allocations…if not then we may sell out also :smile:

Thanks for your reply.
Regards,
Ayush

3 Likes

Dear Ayush,

Thanks again…

I agree with your views and I also deploy 10% to 15% of my portfolio in a basket category which can be termed as “question mark” and see what happens and how the story unfolds (Nitin / Cantabil / Premco etc) …

And yes, the promoters, after reaching a particular size and scale, change their aspirations and attitudes towards business …

From Sunair (Metropolitan Nikko) downside is Rs. 24 Cr. but upside may be huge. But this “hotel issue getting settled soon” story is there for last 8 years as it appears in the attached newspaper clipping. But yes, the story now may be real as Metropolitan Nikko was rumored very close to earlier government and again, if rumors are true then the former Finance Minister, Mr. P. Chidambaram was their counsel and patron (Sunair’s). But I have no idea about the veracity of these claims.

They also have a stock picking ability and have patience to sit of them through thick and thin. Attached is a newspaper clipping just found on the web which says, it had TV18, Apollo Hospital etc earlier.

Also, why so many directors from the company resigned in last few months? Any idea … ??

A meeting with management may be ideal in these type of situations…

Best wishes, always…

Aveek

Hi Aveek,

Thanks for some good pointers. Will try to check on the director thing…however, they had too many of them so may be rationalizing of the same :smiley:

As per the article send by you the value of Hotel is much higher than what I was expecting.

Yes, in cases like these where the past track record is not good, its important to get a meeting to get a feel of things and thought process.

One negative that I see is that they report a very high turnover - perhaps they do some trading activities also - but don’t make much money on the same. This is not good and might be to hide a few things.

Thanks & Regards,
Ayush