The Hindu Business Line : Buoyant market delivers windfall for India Inc

The stock of Mather & Platt, which holds sizeable stake in Shaw Wallace, has, for instance, risen five-fold in the last one year from Rs 28 to Rs 166 now.

In a few sessions, the stock of Eicher jumped up by 20 per cent; reason - it owns shares in the group company Eicher Motors.

For one Eicher or Mather & Platt, there are, however, four other such stocks that the market has still not taken notice of. Thanks to the across-the-board rally in stock prices, there are at least 25 frequently traded stocks whose investment portfolio may be higher, in value, than their market capitalisation.

Prominent companies in this list include Uniphos Enterprises, Jindal Strips, Samtel India, Parry Agro Industries and Maharashtra Scooters. Even in the case of stocks such as Mather & Platt and Eicher, the headroom for further appreciation appears still quite substantial.

For instance, the value of Eicher's investment portfolio alone is worth about Rs 200 and yet the stock is trading at about Rs 81. These are, however, not the only stocks with valuable investment portfolios.

There are also cases of some infrequently traded stocks sitting on substantially outsized gains. Stocks such as Gujarat Organics, Elcid Investment and Swastik Safe Deposits that last traded at a fraction of the value of their investment portfolio. The stock of Gujarat Organics last traded in August 2004 at Rs 12.

The value per share of its investment portfolio is, however, about Rs 3,500.

Similarly, the value of the investment portfolio per share of Elcid Investment and Swastik Safe Deposit are about Rs 4,400 and Rs 3,200 respectively. The stocks though traded for prices of Rs 12 and Rs 6 in 2003.

This trend is part of a larger phenomenon of the stock market rally bestowing windfall gains to India Inc as even large-cap companies are sitting on sizeable gains.

In the case of BSE 100 companies alone, the value of the portfolio of investments may be worth more than double the cost of their investments.

The value of the portfolio of these companies is in excess of Rs 60,000 crore now, while the cost of quoted investments were only Rs 24,000 crore by the end of financial year 2003-04.

Companies such as Bajaj Auto, Tata Steel, Grasim Industries, Reliance Capital and Hindalco are sitting on appreciation in value of more than Rs 1,000 crore each.

Incidentally, the value of their total investment portfolio of many of these stocks may be much higher than the value of their quoted investments. This is because these companies also hold stakes in valuable unlisted firms.

In the 1990s, it was common to find promoters diverting funds into the equities of associate companies.

Such action has usually attracted adverse notice from investors as it was seen as diversion of resources that could have been better deployed in the core business.

Consequently, share prices were also duly marked down. But a silver lining may however have emerged now.

Many of those investments are worth much more now.

Selectively, the stock market too may be taking note of this rise in investment value and marking up the stock price.

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