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Value buys - The intrinsic value is close to market price
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basant
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Quote basant Replybullet Topic: Tata Investments: You cannot lose money here
    Posted: 08/Aug/2006 at 11:55pm

Tata Investments: You cannot lose money here

 

Tata investment Corporation Ltd (CMP 337) is a Tata group Investment Company with interests in Tata Mutual fund through its 49.9% holding in Tata Securities Pvt. Ltd.

As an investment company Tata Investment holds a blue chip portfolio of stocks.  More then one third of the companyís investment portfolio is in Tata group companies like Tata Steel, Tata Motors, TCS, Tata Tea, Trent etc.  

During the Fy 06 the market value of these quoted investments increased by 70% to Rs.2133 crores from Rs.1268 crores in the previous year, Against a market price of Rs 337 the market value of investments that this company holds currently works out to approximately Rs 590 per share This means that an investor is getting these investments for Rs 337 plus the stake in the mutual fund business for FREE. I am taking a 8% lower figure of Rs 590 per share for the market value of investments since the company declared a net asset value figure of Rs 645 per share as on March 31, 2006 and the markets have moved down from that date. The total number of companies in the portfolio was 231 on 31st March, 2006 as against 237 at the end of the previous year. 

Apart from this the company has no basic operating business and is a quasi mutual fund. Tata Investment derives a significant portion of its income from capital gains on sale of long term investments which are largely dependent on the conditions of the stock market.

Market price

Rs 337

Market Capitalization

Rs 1162.69 crores

Book Value

Rs 174.85

Market value of Assets per share

Rs 590

EPS (Fy 06)

Rs 45.66

Dividend per share

Rs 12

RoE

29.96%

Price to Book

1.92 times

Discount of Price to Market value of Investments

43%

PE

7.38

         Market value of investments of Rs 590 per shareavailable for Rs 337 per share.

         Debt free company with an attractive dividend yield at 3.56%. Please note that Tata Investment will always have a dividend yield of at least 75% more then the market dividend yield since the market price is lower to the market value of investments..

         A low dividend yield captures the downside risk of the stock Also there is no need to sell investments to pay off dividend since the dividend that it receives can be distributed directly to the shareholders.

        The Management has a very passive investment style and the portfolio turnover is less then 20%

         This year the company moved a significant part of its investments into bonds and money market instruments. Thus the company could use any downside in the stock markets to increase investments

Concerns: Since the margin of safety is huge 43% there are no immediate concerns as such but being an Investment company with a significant portion of the investment in group companies the market would not give the stock a higher PE.
 
From the current yearís budget long term capital gains will now be liable to tax at the rate applicable under MAT (Minimum Alternative Tax). Thus, the Company's tax liability would increase from the current financial year onwards
 
Recommendation: Tata Investment is an excellent play for the risk  averse investor who wishes to participate into the equity markets with minimum downside risk and stable dividend flow. At current price the stock can be bought for long term gains


Edited by basant - 13/Aug/2006 at 9:33am
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Quote reema Replybullet Posted: 09/Aug/2006 at 5:51pm

Mr Basant,

If you have the list of stocks that Tata investment holds can you give it so we will be able to see holdings of Tata Investment.
You should try to add wealth not multiply it
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Quote basant Replybullet Posted: 09/Aug/2006 at 6:08pm

Sorry, I do not have the details currently, but the management says that it is very much like the BSE 200. In fact thay want their portfolio to be evaluated on the basis of the BSE 200 rather then the Sensex. 

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Quote basant Replybullet Posted: 28/Aug/2006 at 10:55am

Tata investments has moved closer to Rs 400 from the earlier recommended price of Rs 337. At this point  Morgan Stanley Growth fund makes better sense because of its discount to NAV then Tata Investments.

Morgan trades at  a market price of Rs38.05against a NAV of Rs44.63 as on yesterday.
 
Investors buying Morgan Stanley get a head start of about 17% on the market.


Edited by basant - 28/Aug/2006 at 10:55am
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Quote basant Replybullet Posted: 29/Sep/2006 at 3:29pm
There has been a block deal for over 15 lac shares in this co. today.
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Quote investor Replybullet Posted: 29/Sep/2006 at 3:53pm
Yes, and CNBC said that the block deal was probably due the tata sons groups recent strategy of increasing their holdings in their group companies.
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Quote basant Replybullet Posted: 29/Sep/2006 at 3:57pm
Tata Investment is very valuable it holds a lot of other Tata companies!
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Quote vip1 Replybullet Posted: 09/Oct/2006 at 7:40pm

Mr Basant,

Tata Investment holds shares of Tata Sons . Do you have any idea on the value of each Tata Sons share? It is the unlisted Daddy of the Tata Group.
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