& Industries Corporation, a holding company of the Aditya Birla Group, is currently trading at over an 80 per cent discount to its intrinsic value compared to 50-60 per cent for other major holding companies. The current value of Pilani’s investments in listed and unlisted Aditya Birla group companies is around ₹12,228 crore compared with its market capitalisation of ₹2,105 crore.
The company’s investment grew 3.5 times in the last one and half years, whereas the stock price of Pilani rose just 67 per cent from ₹1,138 to ₹1,901 during the period. Bajaj Holding is currently trading at a discount of 64 per cent to its net asset while JSW Holding is at 62 per cent. The stock could provide a good return over the mid-to-long term if investors start valuing it realistically, said analysts.
“If it had moved at the same pace of growth of investments, the stock should be quoting at ₹4,000 today which again is a major discount to the investment value per equity share,” said Ambareesh Baliga, an independent analyst. “Even without assuming the company’s unlisted investments and several properties, the discount is still quite huge.”
The company holds significant investments in equity shares of various diversified companies such as Century Textiles, Grasim Industries, Hindalco, UltraTech Cement, Vodafone Idea, Kesoram Industries, among others. In some of these companies, Pilani is classified as a promoter.
The company’s growth has been closely related to the performance of its investee companies and the corresponding market value of the same. As the economy is moving to normalcy after considerable disruption due to Covid-19, the companies are expected to report enhanced profits, which will enhance their valuations, said analysts.
Pilani’s 3.76 per cent stake in Grasim is currently valued at ₹4,183 crore, while its 33.11 per cent stake in Century Textiles is valued at ₹2,982 crore. It has a 1.21 per cent stake in UltraTech worth ₹2,583 crore. Among the unlisted investments, its stake in Essel Mining at the cost of ₹1 lakh is valued at a few hundred crores.
The company has also expanded its horizon in the last 18 months by entering into financing activities such as corporate loans. The book is about ₹2,000 crore, and the gross interest receipt is about ₹177 crore against the finance cost of ₹52 crore. The company has consistently rewarded shareholders with a strong dividend track record for the last 10 years.
Analysts said there is a huge potential for the holding companies to unlock value if promoters improve the disclosures and asset allocation policies.
“The discount to NAV will come down drastically if promoters of the holding companies improve the disclosures about their underlying assets and allocate capital in a right manner,” said Deven Choksey, MD, KR Choksey Shares & Securities. “There are bargains to be found in those holding companies where possibilities of value unlocking, expectations of growth in consolidated earnings of investments and better dividing earnings and so on if promoters are sincere.”Internet Explorer Channel Network