How to Profit from Holding Companies- Kalyani Investments- A Quest for Value.

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August 14, 2020

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Strategic Alpha

Dear Followers,

It’s been a long time I wanted to write about holding companies on my blog, but due to my time limitations wasn’t able to write for the past few months. But today the day has come, Out of many Holding companies, I liked Kalyani Investments.

Because of my limited time, I want you all to see below the video of research gurukul to understand how to make a profit from holding companies. There are a lot of things to look at apart from this video alone. But for time being you, all can at least go through this video. Varinder Bansal is a champ. He is passionate about stock markets. I love the way he applies logic.

Personally, I don’t like to invest in holding companies, however, I may use these shares for trading with a strict stop-loss whenever stock creates a reversal pattern with excellent risk/reward.

So here is the thesis:-

Holding Companies trade Nearly at an 80% Discount during Bear markets and its discount narrows down to 50% During bull markets. The main important thing while betting on holding companies is, Holding should be direct and not through a subsidiary. As Varinder Says, it should be a pure holding company. Kalyani investments is a pure holding company.

Some Quick Facts about Kalyani Investments:-

  • Marketcap = 615Cr
  • Debt = 0
  • Promoter Holding = 73.6%. More the better, It’s already near the max.
  • Holding Value of Quoted Investments 3850Cr:-
    • Hikal Ltd—3,86,67,375 Shares|CMP 133.5|Valuation 516Cr
    • Bharat Forge—6,33,12,190 Shares| CMP 502.9|Valuation 3184Cr
    • BF Utilities—— 61,95,046 Shares| CMP Valuation 156Cr
  • Marketcap Discount to Holding Value 84%..

Bharat Forge is the world’s largest forging company, however, they are now transforming into E-Vehicles and Defense. For Investments Usually, I don’t like the businesses where they do a lot of things, I like to invest in the businesses in a standalone entity focusing on a single business. I have done my own due diligence by talking to some of the people working in Bharat Forge, A few months back when I asked. It was a gloomy picture about Bharat forge as they were failing in E-Vehicles. However recently they are doing in their Defense segment. Also looking at Bharat forge charts, at least from a chartical view it’s showing a bullish reversal for medium term to long term. Personally will not touch Bharat Forge. However these holding companies give us to be like Dravid and during slog overs, it can play like Sehwag. In fact, I think Kalyani Investments is Kohli. A perfect Mix of Sehwag and Dravid. However, still, I would like to use this stock only for trading based on a technical reversal pattern. Usually holding Companies trade between 60% to 70% during Bull Markets. And we are in a raging bull market now, seeds of that are already sown in the Lock-down Period.

What Will Happen when Discount will Narrow down to 70% in Kalyani Investments??

The current Marketcap is 615Cr, Holding valuation is 3850Cr. If DIscount Narrows down to 70% from 84% Currently, then its Mcap should trade at 1150Cr that will give us 87% Upside in Stock

What Will Happen when Discount will Narrow down to 60% in Kalyani Investments??

The current Marketcap is 615Cr, Holding valuation is 3850Cr. If DIscount Narrows down to 60% from 84% Currently, then its Mcap should trade at 1537Cr that will give us 150% Upside in Stock

As I will be putting money here only for short to medium-term trading, Technical Reversal with Good Risk/Reward becomes very important. So Let’s take a look at the technical front.

TECHINCAL ASSESMENT

Upside Open 36%, Downside 7.5%

I have put my best possible effort to give insights about the opportunity.

     

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The author of the blog Mr.Suyog Dhavan is a Full-time Investor / Value Trader and Value investing/Trading Mentor. His style of Investing is inspired by Mohnish Pabrai, Peter Lynch, and Porinju Veliath. He is the founder of Strategic Alpha Wealth, A Premier stock market mentorship firm with a mission to touch the lives of 1Lakh people through its mentorship program.

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