Looking to buy it cheap via holding cos? Here’s what you can consider

"Trent, purely from the point of view of well managed retail company with a good selection of and well targeted product base, given the fact that they do their own design and a lot of their output, it can justify the kind of growth it has seen,” says Anand Tandon, Independent Market Analyst.

Are you fan of buying it cheap via the holding company route? That is something which historically has worked out in a bull market?
A holding company’s problem is that if they are strategic holders, they are not going to be able to sell. I would always prefer to buy the underlying companies directly. However, that said. as you mentioned. there is a range within which the discounts trend to move.

If you are trying to play for that arbitrage, certainly the range is in your favour. One can look at the holding companies. The timing of when the holding company discount will actually come down has been always a difficult challenge.

I do not think there is any formula which you can decide but by and large when the market is super bullish on looking for new ideas, that is when these kind of companies come up again and you would tend to see some of their discount actually narrow.

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One can look at Tata Investment as that has always been a stock which has traded at almost 40-50 discount to its holding. One could look at that as a closed-end mutual fund as you would any other investment company as well.

I am using superlatives to describe Trent because of their capital allocation policy but it has been 100 bagger in 20 years.
Well it has been one of the best managed retail companies if you see. At a time when other companies were saying that profits did not matter what mattered was growth, Trent kept its head on its shoulder and slowly continued to add to the size to its retail space. It did not go berserk; there was hardly any time when they were leveraged. There were almost never a year that I can remember where they made losses. So it has been a fairly well managed solid growth company and now it has reached a stage and size where incrementally they can be adding what a Trent was five years ago.

Zudio will probably add over the next couple of years now. So the growth has been fairly strong and the balance sheet remains fairly good. As you said, valuations is a concern but that has been a concern for the whole sector.

If you were to look at it purely from the point of view of well managed retail company with a good selection of and well targeted product base, given the fact that they do their own design and a lot of their output, it can kind of justify the kind of growth it has seen.

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