Investment Ideas for India: Vindhya Telelinks Ltd - Investment holding companies a Value BUY

Investment holding companies cos have most of their assets from long term investments in other companies. Some companies also have business activities generating revenues from core operations. Mostly these companies have investments in the their group companies. The promoters are the same of these cos and the operating cos.

Investment holding companies are traded at a discount to their NAV because of the uncertainty of the holding period and lack of liquidity. If the promoters are same they would never liquidate their investments. Recently the discount to which they trade is shrinking. Indian holding cos trade a deep discout as compared to holding cos in developed countries like the US.

This trend is changing as both the FIIs and Mutual funds have started buying them at lesser discounts. Buying shares of companies at a discount through a holding companies gives an investor a long term view.

I was looking at the investments of Vindhya Telelinks Ltd. Here is an analysis of its investment holdings -

Quoted shares
Universal Cables: Total 4839908 no. of shares. The value at CMP of 96 is 464,631,168
Birla ericson optical: Total 4000000 no. of shares. The value at CMP 20 is 80,000,000
Birla corp: Total 6380000 mp/of shares. The value at CMP of 341 is 2,175,580,000

Total value of Quotes shares: 2,720,211,168

Total value of Unquoted shares from the company annual report is 575,703,000

TOTAL 3,295,914,168

Vindhya Telelinks Ltd has a total of 11820000 outstanding shares. Therefore the value of the investment comes out to 278.84 per share.

Consider the three investments in listed companies, viz Universal Cables Ltd., Birla Ericson Optical Ltd., Birla Corporation Ltd. Calculating the total value taking the current market price as on 5th Oct 07, comes out to Rs. 272 Cr. Vindhya Telelinks Ltd. Has a total 1.18 Cr. Outstanding shares which gives a B.V. per share of Rs. 230.

The stock is available at a discount of 34% to just its investments value in the three listed companies. Add the value of the unquoted investments and the B.V. goes up to Rs. 278, and an attractive discount of 45%.

This is just the investment of the company. Lets take a look at their operations.

It was established in joint sector between Universal Cables Limited, Satna, belonging to M.P. Birla Group and Madhya Pradesh State Industrial Development Corporation Limited to implement a project for manufacturing of Polyethylene Insulated Jelly Filled Telephone Cables (JFTC).

The company has become the leading supplier of Jelly Filled Telecommunication cables to Bharat Sanchar Nigam Limited (BSNL), Mahanagar Telephone Nigam Limited (MTNL) and other leading user organizations like Bharti, Huges, Reliance Infocomm, Tata Tele Services, Spice Telecom, NTPC, SAIL, Railways, Defence organizations, Different Coal Fields & Mining Companies, Oil & Refining companies, Department of Atomic Energy, Nuclear Power Corporation etc.

BUY with a target of 278