This Holding Company has the Potential to Exponentially Reward Shareholders!

Nahar Capital and Financial Services Ltd (NS:), registered as an NBFC was incorporated in 2006 to operate as a holding and investment arm of the Nahar Group. The Nahar group is one of India’s largest and oldest textile groups in the country with vertically integrated operations from spinning to garments and retailing. Major companies of the group include- Monte Carlo Fashions (NS:), Oswal Woolen Mills, Nahar Spinning Mills, Nahar Industrial Enterprises, and Nahar Poly Films.

Discount to Holding Value

The value of their investment in listed equity of Nahar group companies is Rs. 979 Cr which is 71% of their value. Combined with their unlisted holdings valued on 31st March 2022 the total value is 1381 Cr, which puts the company at a holding company discount of 60%. The weighted average of the past 5-year CAGR of the listed investments is at 25.57% CAGR and if we consider that being 70% it would imply a growth contribution to the holding company of 18% CAGR.

Why Buy?

1. Statistically in every bull market holding company discounts go down- in this case, if the discount was to go down to 40% the stock price would go up 50%
2. High-quality growth of invested companies- the group companies are each of great value and high growth, while some may argue it’s cheaper to buy them individually we would make the case for the cyclicality and defensiveness of a holding company. That would allow you to size up.
3. High Dividend Retention- The company receives dividends and interest income, however unlike most “holding companies” they reinvest that money instead of paying out heavy dividends. Holding companies that have re-invested dividend income instead of paying it out have in the past mostly rewarded their shareholders.

This stock is a part of the Craving Alpha Core small case which has generated 1.92x returns since November 8th, 2020 by investing in unconventional defensive value investing opportunities like the one above!

Thank you for reading!

Craving Alpha LLP

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