TATA Investments available at 50%+ discount to its NAV!! Should you buy?

Tata Investment Corporation Ltd (TICL) is an interesting company. I have personally liked this company for its simplicity and its dividend payouts. And having a Tata brand attached to it does not hurt anyone. 🙂 This company can be one of those so-called safe businesses, when bought at a good price.

tata investment corporation logo

The business in itself is pretty straight forward. It invests primarily in equity shares, just like any mutual fund. But it does not collect money from investors. It uses its own money for investing.

The Company’s investment philosophy is to “invest predominantly on a long-term basis in (industrial) companies that are well-managed and offer potential for high dividend yield as well as high growth and whose stock may be trading at a discount to its underlying intrinsic value.

The underlined text in company’s investment philosophy is what attracts me to this business. I have always been an advocate of companies which pay decent dividends, even though it may mean that these companies lack better investment opportunities. This is because when investing for decades and not just years, it’s wiser to stick with stable, rock solid dividend paying companies for core portfolio. This helps in generating an ever increasing stream of dividends and provides additional money to fund acquisition of growth stocks.

Now, if we go by the book value of TICL, it has shown a decent (but not continuously increasing) trend. It has climbed up from Rs 150 in 2003 to above Rs 350 in 2013.

tata investment corporation book value per share
TICL Book Value Per Share (2003-2013)

In the meantime, and as already mentioned, the company has been generous to its investors and has doled our liberal dividends year after year. The graph below shows the stability in dividends paid by the company.

tata investment corporation dividend payout
TICL Dividends (2007-2013)

And with recent market correction, the stock is trading at a mouth watering dividend yield of more than 4.5%. For me, this is a very exciting number. But same may not be the case with you. This may not seem like a very big number to you. But assuming you are a long term investor who can hold the stock for many years, the dividends under normal circumstances would continue to increase. This in turn would increase the yearly yield on cost basis. So even if we just look at this stock from dividend income perspective alone, the stock deserves to be accumulated at current levels.

Another interesting way to check stock valuation for this company is to compare the stock NAV with its current market price. This NAV as explained on company’s site, is a measure of market value of all investments made by the company. This is similar to a mutual fund’s NAV. If you see the graph below, it’s clear that market price has always traded at a discount to company’s quarterly disclosed NAV. This is not a strange phenomenon as holding companies (like TICL) tend to trade at a discount to the market value of their investments.

tata investments stock price discount NAV
Stock Price has always been less than company’s (investment) NAVs

But important point to note is given in the next graph. The red straight line is the average discount at which the stock has traded to its NAV. This is close to 38%. But with recent fall in share prices, the discount has widened to around 55%. 

tata investments stock price discount with NAV percentage
Discount to company’s NAV has risen in recent times (Check Right part of chart)

Now, TCIL has traded at such steep discounts only in the crisis of early 2009. Such deep discount to NAV demands that this business be given a serious thought when buying stocks for long term portfolio. 

Risk – Before you go ahead and buy this stock, please do remember that just like stock price, this NAV too is market dependent and fluctuates depending on market value of investments made by the company. For a detailed description of company’s investments, please go through the latest Annual Report here. For a quick glance of company’s financials, click here.


Disclosure – Long term positions in TICL.

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Rethinking Dead Monk’s Portfolio – Part 2

We are in process of making an annual assessment of our Dead Monk’s Portfolio. In our last post, we tried to questioning portfolio structure. We eventually arrived at a conclusion that Core-Satellite structure has worked for us and we are going to stick with it. But we have made slight adjustments to it. We now have a simpler SATELLITE structure. For more details about the new modified portfolio structure, please refer to this.


Do we need more dividend stocks?

In previous post, we mentioned that we might need to find new dividend stocks for the CORE of the portfolio. This was to stay prepared for possible exits from existing positions and to maintain the dividend income levels from the portfolio. We are almost through with our stock selection and we feel that inclusion of new dividend stocks may not be necessary at present. Reason? Apart from 5 stocks which will form our dividend core, the stocks forming part of the Large Cap Satellite themselves have decent dividend yields. Add to this the fact that a pick in Growth Oriented Satellite comes from energy sector and has recently announced a promising dividend policy.

We have chosen 13 stocks for DMP. Out of these 8 stocks have a known history of paying generous dividends to the shareholders.

dividend history
Dividend History
Do we need to have stocks from every sector?

The answer is a big NO!! The chosen 13 stocks belong to just 4 sectors. These are sectors and industries which we are comfortable with.

Energy – 4 companies
Chemicals – 1 company
Financials – 4 companies
FMCG – 2 companies
Others – 2 companies

sector allocation in stock portfolio
Sector Allocation
At present, we are not very comfortable with FMCG sector valuations. But we have still chosen 2 stocks from this sector because this is a portfolio, which can be kept for years, if not decades. But we do believe that currently, FMCG stocks are good businessesto buy, but not at current valuations.

Another thought which bothered us was that we regularly come out with list of stocks like 10 Stocks to buy in next market corrections & 13 Great Indian businesses. Wouldn’t it be a wise idea to have a few of those stocks in this portfolio? This concern has been addressed in the new portfolio and a number of stocks from these lists have found their way to Dead Monk’s Portfolio. 🙂

We have intentionally not chosen specific stocks for cyclical section of the portfolio because these stocks would be bought and sold at regular intervals. We do not plan to hold them for decades at a stretch.

We would share the portfolio composition in our next post.

Dead Monk’s Disclaimer – As an investor, we can never eliminate the risk of being wrong.

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Dividend Analysis of stocks in Dead Monk’s Portfolio

We highlighted in an earlier postthat DMP would be built, primarily around dividend investing.  The core of DMP is made up of 5 stocks, namely ONGC, Clariant Chemicals (I) Ltd., Balmer Lawrie & Company, Graphite India, Tata Investment Corp Ltd. And let us confess. We did receive a few brickbats about our stock selection for forming the core of DMP. So here we would like to offer a few thoughts –
  • These 5 stocks are selected on basis of our (not your) risk appetite.
  • These stocks have been selected for long term (10+ years) and not for trading on daily or even monthly basis.
  • We do not expect these to be multibaggers. Though we would love them if they become one.
  • Selecting these 5 stocks in core does not rule out any further addition to core in future.
  • These stocks do not disturb our sleep at night.
  • We may or may not be comfortable with stocks current price.
  • We are comfortable and very happy with present dividend policy and consistency of these 5 stocks.


As you can see in above table, all 5 stocks have been consistent dividend payers for last 5 and 10 years.

But at present, multiples at which Clariant Chemicals (I) Ltd is trading are not cheap. A P/E of 17.5 is much above our liking and so is P/BV of 3.3 (Read a good analysis on Clariant at SN). As far as we are concerned, we would start accumulating once the stock comes down on these parameters. Tata Investments is primarily an investor in famous Tata companies which include cyclicals like Tata Motors and Tata Steel. Current P/E of 15.4 is not to our liking and we would rather wait before further buying.

Part from these 5, we also proposed 7 large cap stocks in DMP. Though we picked these stocks for their stability, a good and regular dividend payout can be an added advantage.


BHEL, NTPC, BOB and NHPC have quite tempting dividend yields considering the fact that initially, we picked them for their large capitalization and stability 
(Note- NHPC has not been as stable as we would have liked and has been consistently falling after its IPO. But we feel that at CMP of 18, it can be a decent bet for long term.)

As far as growth stocks are concerned (Yes Bank, Cairn India, GSPL & Sterlite Industries), we don’t expect such stocks to pay dividends (consistent or not) for a few years as they are in growth phases and would be reinvesting money in their own businesses.


Dead Monk’s Disclaimer – No matter how careful we are, as an investor, we will never be able to eliminate the risk of being wrong.

PS – Please do check ‘Stock Screenersin widget area on right side. These can be good starting points for shortlisting good stocks.

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