Three attractive holding firms to consider
- January 22, 2016
- Posted by: Admin
- Category: Blogs
The season of business restructuring, whether through mergers, spin-offs or initial public offering (IPO), is tightening its grip on corporate India. One of the focus areas this time are companies exploring business restructuring to unlock value, particularly for the banking and financial services (BFSI) vertical. Of late, Grasim, Reliance Capital and Tube Investments are three names grabbing a lot of headlines for this reason. Here Why:
Currently, ABCL accounts for about 20 per cent of Grasim’s overall valuations. The bet is quite high on the BFSI business primarily for its diversified presence across 13 segments, with NBFC lending, life insurance and mutual funds being the key businesses. The business posted profit before tax of ~1,150 crore in FY17 with about 70 per cent of the profit coming from the NBFC business. The rest was contributed by the asset management and insurance verticals. After listing, analysts believe the holding company discount for Grasim could narrow from the current 45 per cent. It is believed Premji Invest has acquired 2.2 per cent stake in ABCL, valuing it at ~32,000 crore.
Tube Investments of India (TII), will continue to operate the cycles and accessories, automotive and industrial gears, engineering products and metal formed products businesses. The financial services arm, to be known as TI Financial Holdings, will operate the general insurance, risk services and Cholamandalam Investment and Finance (CIFC, already a listed NBFC). With the general insurance business posting 41 per cent revenue growth in FY17 (to ~208 crore), analysts at Sharekhan feel it is a wild card in the pack, which will create long-term value for investors, given the strong growth in earnings. With net profit for Tube Investments almost doubling to ~200 crore in FY17, analysts at Axis Capital expect net profit to touch ~300 crore by FY19 as better operating leverage kicks in.
RCap is looking at 10 per cent dilution through IPOs in these businesses. RCap’s move comes at a time when ICICI Lombard (a general insurance company) and UTI (a mutual fund) are also looking at listing their businesses. In addition, on Monday, the listing of Reliance Home Finance was approved by its shareholders. So, in the coming months, investors should expect each of RCap’s business units to hit the bourses.
Source – Business Standard