Sounds too good to be true, doesn’t it?
No, I am not talking about mutual funds.
I’m talking about companies that have investments in other companies.
While some of these are holding companies, others are companies that have built up a desirable stock portfolio over the past few years.
Here are 5.
# 1 HDFC
Housing Development Finance Corporation (HDFC) is an Indian financial services company based in Mumbai, India.
The company is a major provider of housing finance, but also has a presence in other sectors such as banking, insurance, asset management and venture capital.
The company has built a reputation as a rock solid financial institution. Not only in India, but around the world.
HDFC and its wholly owned subsidiaries, HDFC Investments and HDFC Holdings, own 21.1% of HDFC Bank.
It also owns a 49.9% stake in HDFC Life and a 52.7% stake in HDFC AMC.
The total value of its investments in the three entities amounts to ??2.9 tn on October 1, 2021.
HDFC plans to list its unlisted subsidiaries such as HDFC Ergo and HDFC Credila in the coming years. He is also committed to investing ??1 billion technology start-ups each year.
Even if a few of them become credible investments for HDFC, they could generate huge returns for investors.
The company’s shares have risen 53% in the past year. Its total market capitalization is approximately ??5 tons.
# 2 Bajaj Holdings & Investments
Next on the list we have Bajaj Holdings.
Bajaj Holdings Investment (BHIL) is a non-bank finance company (NBFC). The company was formed during the split from Bajaj Auto in 2007.
The manufacturing business was transferred to Bajaj Auto (BAL) while the wind farms and financial services business was transferred to Bajaj Finserv (BFS).
All the assets and liabilities of the former Bajaj Auto, with the exception of the manufacturing and financial services activities, now remain with BHIL.
BHIL has a 35.7% stake in Bajaj Auto and a 41.6% stake in Bajaj Finserv. Both companies are market leaders in their respective sectors.
The total value of his stake in the two companies amounts to ??1.5 tn on October 1, 2021.
Bajaj Finserv also has stakes in Bajaj Allianz Life, Bajaj Allianz General Insurance, Bajaj Finance and Bajaj Financial Solutions.
In the past year, Bajaj Holdings stock has nearly doubled or jumped 97% from a 53% increase in the benchmark.
# 3 Mahindra & Mahindra
The third on the list is Mahindra & Mahindra.
Mahindra & Mahindra (M&M) is a multinational automobile manufacturing company in India.
The group is present in sectors such as financial services, hotels, infrastructure, retail, logistics and IT.
M&M benefits from a large portfolio of investments. The company had 181 subsidiaries as of March 31, 2021. Some of them are also listed on the stock exchange.
The market values ââof these investments are significantly higher than their book value, which provides a cushion for M & M’s overall financial flexibility.
The participation of Mahindra & Mahindra in the aforementioned companies is worth ??607.8 billion as of October 1, 2021.
Among these, Tech Mahindra is riding the trend of digitization. The company has carried out projects in the areas of digital integration and automation to transform its customers’ businesses and prepare them for digital.
The company’s shares have risen 31.5% in the past year. Since its listing in 2006, the stock has increased by more than 3,000%.
# 4 Tata Investment Corporation
Next on the list is Tata Investment Corporation.
The company is an NBFC which invests in a diversified portfolio of companies.
It was founded in 1937 as The Investment Corporation of India and remained a private company until 1959 when it was listed on the stock exchange.
Currently the company is invested in 70 companies.
It invests in Tata and non-Tata companies, although investments in Tata companies constitute a larger part of the company’s portfolio.
Here are the names of the listed companies in which Tata Investments has a stake
The total market value of its listed investments amounts to ??137.4 billion as of March 31, 2021.
The company has grown by 12% (CAGR) over the past 15 years, compared to 10% (CAGR) of the BSE 200 index. It has increased its investments by 5.5 times during this period.
Shares of Tata Investment rose 62.2% last year. Over the past five years, the stock has increased 121%.
# 5 Information border
Last on the list is Info Edge.
Info Edge (India) is an Indian pure play internet company based in Noida.
The company operates the online job portal naukri.com, the marriage website jeevansathi.com, the real estate classifieds platform 99acres.com and the educational website shiksha.com.
It also owns 28% of its invested assets in various companies, either directly or through its wholly owned subsidiaries.
She owns minority stakes in 19 online companies, including Zomato and PolicyBazaar.
Info Edge was one of Zomato’s first investors. He sold 3.3% of his stake in the company during the company’s IPO via a Offer for sale.
He currently owns 15.2%, which is worth more ??150 billion.
It also owns a 14% stake in PB Fintech, the parent company of PolicyBazaar.
PolicyBazaar recently filed its papers with the market regulator and plans to increase ??600 billion via its initial public offering (IPO). InfoEdge should also benefit.
Why should you invest in companies with equity portfolios …
Companies with large equity portfolios generally trade at a discount. One of the main reasons for this is its diverse portfolio.
Since all subsidiaries of a holding company do not fare equally well, the poorest performers drag down the overall valuation of the holding company.
These companies are also less volatile
This is due to their high participation in promoters and their limited liquidity in the market. It also means that they may not see a sustained rally. However, there are exceptions.
While the above reasons speak for investing in such companies, as with any other investment, one has to look beyond the haircut.
To be cautious, investors can bet on holding companies that have only limited subsidiaries in their portfolios. They should also take into account the quality of management of holding companies.
This article is syndicated from Equitymaster.com
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