Value Pick: Is it time to buy the deeply discounted holding companies?

Jul 25, 2023 By: Malini Bhupta

What is a holding company?

A holding company is a listed company that holds shares in other operational listed or unlisted companies of the same group. These companies earn dividends or interest income from businesses where they have stakes. Credit: Unsplash

Why do holding companies trade at a discount?

As a rule, holding companies trade at a discount to the underlying value of their holdings. So if Godrej Industries is the holding company, it tends to trade at a discount to other listed companies in which it holds stakes. The discounts can range between 50-80 per cent. Credit: Unsplash

Here are the top six holding companies that investors can look at

Why invest in a holding company and not the operational business directly?

SBI Securities argues that holding companies where dividend payout ratio is higher & consistent tend to trade at a lower discount. “During a volatile environment, high dividend yield acts as support to the stock price.” For example: Bajaj Holdings (dividend yield: 1.7 per cent) & Tata Investment Corporation (dividend yield: 2.1 per cent) have a consistent track record of dividend payout every year. Credit: Unsplash

Maharashtra Scooters Limited – total value of holdings Rs 26,410 crore

This holding company’s market cap is at Rs 6490 crore and is trading at a 75 per cent discount and has a dividend yield of 2.9 per cent. It has stakes in Bajaj Auto (2.5 per cent), Bajaj Finserv (2.4 per cent), Bajaj Finance (3.1 per cent) and Bajaj Holding (3.0 per cent). Credit: Bajajauto

Pilani Investment & Industries Corp - total value of holdings Rs 9807 crore

This holding company has a market cap of approximately Rs 2000 crore and trades at a discount of 78 per cent. It has a dividend yield of 0.8 per cent. It has investments in Grasim (3.8 per cent), Ultratech Cement (1.2 per cent), Hindalco (1.3 per cent), AB Capital (1.3 per cent), ABFRL (0.4 per cent) and Vodafone Idea (0.2 per cent). Credit: Pilani Investment

JSW Holdings - total value of holdings Rs 14,784 crore

This Sajjan Jindal controlled entity has a market capitalization of Rs 4923 crore and is trading at a 66 per cent discount. Its dividend yield is 0 per cent. It holds stakes in the following companies of the group: JSW Steel (7.5 per cent), JSPL (0.4 per cent), Jindal Stainless (0.2 per cent). Credit: JSW

Godrej Industries Limited – total value of holdings Rs 52966 crore

This holding company market capitalisation as of 20 July was at Rs 16,057 crore and trades at a 69 per cent discount. It also has a dividend yield of 0 per cent. It holds stakes in the following group companies: Godrej Consumer (23.7 per cent), Godrej Properties (47.3 per cent), Godrej Agrovet (54.9 per cent). Credit: BCCL

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