Holding and investment companies trading at 30-70 per cent discount to underlying assets is nothing new. But Kalyani Group's investment company Kalyani Investment Company, a smallcap, is trading at an unusually 90 per cent discount.
The market value of three companies where Kalyani Investment Company holds material stakes -- BF Utilities, Bharat Forge and Hikal, were worth Rs 7,147 crore, as of Tuesday's close.
Retail investors holding up to Rs 2 lakh worth shares owned 15.64 per cent stake in Kalyani Investment as of September 30. This 15.64 per cent stake is valued at Rs 1,117.79 crore, if Kalyani's investments are taken into consideration. But the company's total market capitalisation as of Tuesday's close stood at Rs 814 crore.
The stock is illiquid.
Kalyani Investment, a part of $2.5 billion Kalyani Group, has investments in listed and unlisted companies from sectors such as forging, steel, power generation, chemicals and banking.
It was formed in 2009 by demerging the investment business of Kalyani Steels and by amalgamating investment undertakings of three of wholly-owned subsidiaries of Kalyani Steels namely Chakrapani Investments & Trades, Surajmukhi Investment & Finance and Gladiolla Investments.
In Bharat Forge, this investment company held 6,33,12,190 shares or 13.60 per cent stake, as of September 30. This stake is worth Rs 5,526 crore as of Tuesday's closing. Kalyani Investment's 31.36 per cent stake in Hikal was worth Rs 1,388.72 crore. In BF Utilities, the company had 16.45 per cent stake, which was worth Rs 233.13 crore as of Tuesday's closing.
G Chokkalingam, founder of equities research and advisory firm Equinomics said a 90 per cent discount for investment company is a surprise. He said normally there is a discount of a maximum of 60-70 per cent and, only in rare cases, companies with serious issues, have such deep discounts. The expert said a discount for an investment company depends on four key factors.
Second, Chokkalingam said, is the hope that the investment company will someday unlock value from investments. He noted that there were rare cases where the investment companies distributed shares to investors.
The scrip is up 5 per cent in 2022 so far. It is down 30 per cent in the last three years.
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