Originally posted by deveshkayal
My view is that market should not give more than 15% holding company discount.Network 18 should call for analyst conferance.I agree with the FT Fund Manager.NW18 being a media company should not trade at 50% discount.
Smartcat is right..NW18 is a different type of holding company.Since Rel Cap is holding stake in NW18,marathon Ambani will make sure that it does go down from his acquisition price. |
There are many reasons why smaller capitalised companies go down. Now take a look at the total purchase quantity of marathon Ambani. It exceeds 25 lacs shares now to make even a 10% addition to his portfolio he would need to buy 250,000 shares from the market. the daily delivery stats do not show that kind of a availability.So with such a small volume being traded smaller capitalised companies could drift in price; break all supports and then recover back!
I have been holding Pantaloon and Tv18 since they market caps Rs 80 crore and Rs 150 crores respectively and you would not believe that on certain days these stocks started to fall as if the world is coming to an end.Worst of all the reasons were not available.
Now check the records for this. Last year Sonata Investments bought Tv18 at Rs 500 odd and in 40 days the stock fell to Rs 325! Though it is a 6 bagger in less then 12 months the point is we never know how much stocks can fall.
"If you get panic stricken when your stocks fall by less then 50% you should not be in this business at all" - Warren Buffet.
The bottomline is that till the underlying buisness is strong holding companies SHOULD NOT underperform the subsidiary but as investors we like sitting on the horse(listed subsidiary) rather then the cart (holding company) that is pulled by the horse!
A cousin who works at a leading private equity company also held the same view that over a period of time holding companies should not underperform their listed subsidiaries.
The charts given in the previous page also indicates the same theory.
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