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Our Take:

Bajaj Holding is purely an investment company with no own operations and is registered with the RBI as a NBFC-ICC. Majority of its value comes from the investments in its associate companies Bajaj Auto Ltd (BHIL stake 35.77%) and Bajaj Finserv (BHIL stake 41.63%), both of which have been performing well and have strong growth potential. Apart from strategic equity investments in group companies, BHIL has equity and fixed income investments worth Rs 9187cr as on Dec’20. As against a book value of Rs 1,186/share, NAV of all the investments (inclusive of strategic holding) was Rs 9,119/share as on 31-Dec-2020. Being a holding company, it trades at a significant discount to its asset value which may contract going forward. Listing of subsidiaries of associate companies (BAGIC) could further enhance its value.

Valuations & Recommendation:

Given the strategic nature of BHIL’s investments (BAL and BFS), we have given a holding company discount to its equity investments in its associate companies while the other investments have been valued at cost. The stock is currently trading at ~60% discount to its 31-Dec-20 NAV. We believe investors can buy the stock at CMP and add on dips to Rs 3300-3310 band for a base case target of Rs 3880 and bull case target of Rs 4560.

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