Holding companies have of late found favour in the market as traders have looked to exploit the gap that usually exists their market value and the value of assets on their bookings.Such stocks usually trade at a discount of anywhere between 30-80 percent to their book values and they usually find favour once the discount widens to the most extreme end.Yesterday, shares of a number of companies -- Jindal Group's JSW Holdings, Nalwa Sons Investment Bombay Burmah Trading Corporation (Wadia Group), Baba Kalyani's BF Utilities/Kalyani Steels -- moved in trade by one stock remained largely untouched: Bajaj Holdings & Investment.
Bajaj Holdings, however, enjoys a strong profile.It has a market capital of nearly Rs 20,000 crore. The stock is trading around 60 percent discount to the value of the investments on its book. The company has zero debt on its standalone balance sheet. Rahul Bajaj is the Chairman of this company while Sanjiv Bajaj is the Managing Director.
Investments on the company's balance sheet can be divided into three parts: investments in group companies, investments in other listed entities not part of the group and unlisted entities.
Balance sheet pictureBajaj Holdings holds nearly 31.5 percent stake in Bajaj Auto, a stake nearly worth Rs 26,000 crore at current market price. This company also holds 39 percent stake or nearly 6.23 crore shares in Bajaj Finserv, the value of which is nearly Rs 17,000 crore. Indirectly, the company holds 20 percent stake in Bajaj Finance via Bajaj Finserv because Bajaj Finance holds 57 percent stake in Bajaj Finserv. Additionally, it holds 16.5 percent stake in Bajaj Electricals worth Rs 450 crore and nearly 24 percent stake in Maharashtra Scooters: worth nearly Rs 420 crore. So the value of the group entities alone is nearly Rs 44,000 crore.
Investments in non-group companies include stakes in ICICI Bank, Bharti Infratel, Axis Bank, CARE and Force Motors. The value is nearly Rs 3,000 crore.
Bajaj Holdings also holds stakes in unlisted entities NSE and BSE, both bound for initial public offering (IPO). Besides, it has cash of nearly Rs 1,500 crore and no debt.
In sum, the company has investments of nearly Rs 49,000 crore while the marketcap is nearly Rs 20,000 crore, implying a discount of about 60 percent. Historically, the stock has traded at a discount of a band of 50 to 70 percent.Since one has seen the discount narrow for other holding companies lately, if Bajaj Holdings' discount were narrow to nearly 50 percent, the value of the stock could be around Rs 2,200 per share.
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