Bajaj Holdings: Trading at a discount to intrinsic value
Bajaj Holdings & Investments Ltd (BHIL) is the holding company of Rahul Bajaj Group’s strategic investments in Bajaj Auto, Bajaj Finserv and Maharashtra Scooters; and investments in government securities, bonds, debentures and mutual funds. The company’s major investment is in the equity shares of ICICI Bank.
The market value of this investment portfolio stood at Rs8,037 crore as on September 30, 2008. The same would amount to an estimated Rs5,670 crore now, after taking into account the erosion in the market value of some of its investments in the past two months.
At the current market prices of its strategic investments (Bajaj Auto, Bajaj Finserv and Maharashtra Scooters) and considering the appreciation in its bond portfolio, BHIL’s value per share works out to Rs561. This is at a steep discount of 68% to BHIL’s current market price of Rs222. BHIL is a zero-debt company.
That’s not all. Given the fact that the group companies are trading at a discount to their intrinsic value, the actual discount of BHIL to the current market price would be much higher. This makes the stock more attractive.
We, therefore, maintain our Buy recommendation on the stock. However, the price target continues to be under review, as we require more clarity on the growth outlook of its insurance arm, Bajaj Finserv.
Bajaj Holdings & Investment
Cluster: Apple Green
Recommendation: Buy
Price target: Under review
Current market price: Rs222
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Holding companies usually trade at discount only .. in that view how much (normal) appreciation is possible in this stock.