- These stocks often do not pay any dividend
- The value is unlocked only if the company divests its stake, which is unlikely.
- Promoters control over 50%(and often over 76%), so minority shareholder rights can be trampled upon with impunity with corporate actions like demergers.
- Mkt value of group company investments around 17,000 crores. Even applying a 70% valuation discount for control, that comes to INR 5100 crores. Add nearly 5000 crores of other investments, and the intrinsic value comes to around INR 10,000 crores. Company is debt free, with little intercompany loans, so this figure(Rs 10,000Crores) can be the conservative 'fair value'.
- Promoter holding(incl associates) is hardly 50%, so the possibility of minority shareholder abuse is lower. If the company decides to sell out/divest, it needs the minority shareholders on board for most corporate actions. This, coupled with the generally good corporate governance, reduces the possibility of tunneling, as may happen in companies with promoter holdings over 76%.
- As Sharekhan mentions in its research report(http://www.moneyguruindia.com/article.php?cid=1358&id=4), the present dividend yield is good. But this cannot be relied upon for long. So I'm not factoring dividends, since this is quite discretionary.
Conclusion:-Both Bajaj Finserv and Bajaj Auto are doing well in their industries. The triggers for further growth in the share price would be
- Increase in professional management, specially at the operating subsidiary level
- General rerating of holding companies, thus reducing the valuation discount.
- Operating subs doing well, therefore boosting the holding Co shareprice proportionately.