CV Desai is an astute value investor from Kolkata and he holds about 8%(through his company also) in Maharashtra Scooters. Bajaj Auto on the otherhand holds 24% in MS so Bajaj does not want to let go of this so soon. Basically MS has a dead business.Now I wanted to see how deep this discount was in case of MS.Many times things seem cheap and and they remain cheap that would be of no help to an ordinary investor.

 

Right now MS is avaailable at a 40% fall from its 52 week high of Rs 499 while Bajaj is off less then 20% from its 52 week high so the discount seems to be highest right now. Also with these companies they may lie dormant for a few years also so it is essential that investors understand that perspective before buying it.

 

 

The only point in this case is when will the cream be available for appropriation? Also as Bajaj still holds 24%, they would not allow BAL shares to be sold in open market. So it again becomes a holding company with interests in BAL.

I know many such companies where NAV is musch discount to current market cap. But r they worth investing. A big no. You don't want to be speculative and leave ur fortunes to uncertainity, when you have hundredes of good operating companies.

There are 2 use cases for such companies ..

 

1. If company is promotor of operating company - Like pantaloon Ind is of Prantaloon Retail. In such cases why would promotor like to sell it's holding. He is promotor of holding company and though this he acting in concert in operating company. It is his interest to retain holding company as such. If he sells shares then it is like selling it's own stake. Why will he do that if operating company is doing excellent. Such companies are generaly private companies but due to some historical reasons they are public but still promotor would like to make it as a dummy private company.

 

2. If company owns shares just for investments - One can find hundreds of such company. Which deals in shares as a extra income. These promotos put money in stock markets instead of in operating business for their gains. For exmaple a small tea company owns shares of RIL, INFY, LnT worth 20 Cr. Can you trust such promotors ? which instead of putting cash in tea business they put in stock markets. I guess NO.

 

I advise ppl to values a company from it's operating business point of view, not from investments. I know technically it is not correct but there is difference between knowledge and wisdom.

 

If INFY is know in the world, they are know by it's business not by it's investments of 1 Billion USD. etc. etc.

 

Investing in such companies belong to insiders/small type brokers etc not for mid/long term investors.

 

In should always look at operating company unless promotor is known for it's honesty and acumen. For example HDFC is holding company for insurance business but still HDFC is proxy to insurance company. Can we say same for MSL with greate degree of certainity. I guess no.

Can we say same for pantaloon indutries. No.

Can we say about nagreeka export. No.

 

So be little informed about padigree of promotor before making such speculative moves.

 

 

http://www.dnaindia.com/report.asp?NewsID=1075141 - http://www.dnaindia.com/report.asp?NewsID=1075141