Holding company discount
Also called: net asset value discount, NAV discount, conglomerate discount, sum of the parts
The gap between a holding company's market value and the net value of the stakes and assets it owns.
Holding companies usually trade below their net asset value because of tax and costs on releasing value, limited access to subsidiaries' cash, doubts about capital allocation and the controlling shareholder's lack of reason to close the gap.
Example
Stakes and cash worth ₹10,000 crore net of debt, against a market value of ₹5,500 crore, is a 45% discount.
Learn more in these lessons
- Minority shareholders, holding companies and conglomeratesWhy do holding companies trade at a discount, and what risks do group structures pose?
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