Maharashtra Scooters Limited – An Investment Company. Trading at a huge Discount.
Maharashtra Scooters Limited (MSL) was formed in 1975 as a JV between Bajaj Auto Limited (BAL) and Western Maharashtra Development Corporation, a Maharashtra State Undertaking (WMDC) with BAL holding 24% and WMDC being major partner holding 27%. A protocol agreement was signed that none of the promoters would increase or decrease their holding in percentage terms and would first offer the shares to other promoter if anyone wants to exit.
BAL wanted to buy WMDC’s holding in MSL since long and in 2003 WMDC offered to sell its holding to BAL which could not materialize on pricing issue. The matter was later decided by Arbitration Award in favour of BAL but WMDC went to Bombay High Court and which held that Right of First Refusal under protocol agreement was void and WMDC was under no obligation to first offer shares to BAL. The Order was appealed ny BAL with The Division Bench of The Bombay High Court and in 2015 The Division Bench held that WMDC would have to part off with their stake of MSL in favour of BAL at the rate arrived at by the Arbitrator earlier. The matter is now pending in The Supreme Court.
MSL is basically an Investment Company now holding shares of various Bajaj
Group Companies. The current NAV is more than 5500/-per share against its market price of 1800/- per share. It has also a land parcel at Satna..
It holds the shares of following group companies—
Bajaj Finance Limited
Bajaj Auto Limited
Bajaj Finserv Limited
Bajaj Holdings & Investments Limited
Most of these are outperformers no doubt. It has already stopped its manufacturing activities of scooters since long back (since about 2003) and announced it officially in its Annual Report of 2006. It has retrenched 80% of its employees in the past and is left with only approx. 100 employees now.
The Company has recently been converted into a CIC (Core Investment Company) which is more or less like NBFC in nature and should augur well for the company in future.
The company is quoted at a steep discount of about 70% to its NAV. Most of the investment companies are quoted at a discount but this 70% discount is on the very high side for a company which belongs to Bajaj Group. All of its invested companies have outperformed for years in the past and are expected to do the same in future. The NAV for MSL would not become stagnant but would move up day by day with the performance of its invested companies of Bajaj Group.
We have seen in the recent past that the management has bought shares of Bajaj Auto limited, Bajaj Finance Limited. Once they are through the protocol with WMDC they would be in a position to buy the shares of MSL where they would get the holdings in Bajaj Group companies indirectly at a discount of say 70%.
We are sensing the awareness developing recently amongst the investors for such companies which are quoted a heavy discount for no reasons.
Florence Infotech Limited is an investment company of JK Group and holds shares of JKPaper LTD and JKTyres LTD besides others. It has moved up from 565/- levels to 800/- levels in the month of March 2017 (15 days only) . This is despite the fact that its invested companies have not performed much during this month. This can be attributed to the awareness developing amongst the investors that such investment companies of big industrial houses can not continue with the discounting going on and should create value for the investors.
Similarly we have a good interest in Kalyani Investment Company Limited which holds mainly the shares in Bharat Forge Limited besides others. This is again quoted at a discount of 75% to its NAV. A company from Kalyani Group commands at least much lesser discount and investors have started sensing this thing slowly.
Summit Securities Ltd which is invested in Ceat Limited basically has moved up from the recent levels of 430-435/- to 525/- levels in a very few trading sessions.
Disclosure: I personally hold the stock so my views may be biased.
Disclaimer: I, am not registered under SEBI (Research Analysts) Regulations, 2014. No content on this blog should be construed to be investment advice. Any security specific discussion on this site is not a recommendation to Buy / Hold / Sell. The purpose of this site is solely for investor education. You should consult a qualified financial advisor prior to making any actual investment or trading decisions.
Wow. Nice analysis.
Also to know in detail – how did you arrive at the NAV? The current NAV is 5500/- ???
Just multiply the # of shares held in the holding company and the current market price.
He is a contrarian point of view on why these holding companies need to be studied carefully before investing. Case in point is Kalyani Steel.
What is the value of MSL investment in Bajaj group as on today 14.09.2017