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FINANCIAL CHRONICLE™ » FINANCIAL CHRONICLE™ » Renuka Holdings

Renuka Holdings

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21Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 12:20 am

chandikahw


Stock Trader
Another small point: RHL was awarded one of the best (Under 1 billion or some thing...) companies by.. (I cannot remember)... Pls verify this, and comment on its significance.

22Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 2:07 am

Antonym


Vice President - Equity Analytics
Vice President - Equity Analytics
@The Alchemist wrote:
...How come Investment Trusts trade at a significant discount to their Intrinsic (asset) values whether it is a bull or bear market, whilst it is accepted that Diversified Holdings trade at sometimes many multiples of their Asset values and are evaluated more on their earnings (P/E)...

I find it ironic that CIT (an Investment Trust) NAV over 240 is trading at 100, and owns approx 18 % of CFLB (which is a Diversified Holding) and cannot equity account for CFLB earnings. But it would be ok for CFLB to trade at a premium to its asset value since its a Diversified Holding. Same with GUAR (NAV around 250, trading at 160) with 80% of portfolio consisting of BUKI, JKH & COMM bank, and BUKI & JKH which are Diversified Holdings trading over their book values!
Opportunities come disguised as ironies/anomalies sometimes.
I believe that, over time, the valuation gap between Diversified Holdings and Investment Trusts will narrow.
To profit from such opportunities, one necessarily needs to have a long term perspective.

Another anomaly, another opportunity?
In one country that is growing at 3%, the market is hitting new highs and trading at a P/E of 15.5.
In another country that is growing at 6.25%, the market trades at a P/E of 11.4.

23Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 9:11 am

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@The Alchemist wrote:
@Jana1 wrote:
@knockknobbler wrote:@ Jana 1

..

Actually, Jana1 has bought up a very interesting point !

Firstly i cannot understand how Vone, FLCH & BIL are considered Diversified Holding Companies when RHL is considered an Investment Trust ?
............
Secondly, how come Investment Trusts trade at a significant discount to their Intrinsic (asset) values whether it is a bull or bear market, whilst it is accepted that Diversified Holdings trade at sometimes many multiples of their Asset values and are evaluated more on their earnings (p/e).
..........
.......................

@Alchemist
Good , that you also have intervened here.
Wish to make few comments on issues you have raised.

Firstly i cannot understand how Vone, FLCH & BIL are considered Diversified Holding Companies when RHL is considered an Investment Trust ?
No idea about the basis of CSE sector classification. I also find this classification is absurd, because it is observed that companies within a particular Sector is vastly different in their scope, nature of business, size, market penetration etc. Forget about BFI or Diversified Sectors (where this mismatch is clearly visible), even seemingly uniform Manufacturing sector, companies producing cables, cement, tiles, tyres etc, are dumped together. These different industries have different cost structures, margins, capital investment , ROI, etc. Main reason for CSE , may be there are one or two companies in this different industries. But the question arises when someone compare a company performance /indicators with the sector performance /indicators. I find this, utterly misleading .
Even in this thread, there is an opinion to judge a company (undervalued /overvalued ) comparing to Sector indicators. In most Broker Research Reports this comparison of Company vs Sector, is the primary basis for buy/sell recommendation. Even reputed Research firms make comments on this comparison, probably going by their experience in Markets in developed countries, forgetting about the fundamental differences in companies within a particular sector of CSE.

Secondly, how come Investment Trusts trade at a significant discount to their Intrinsic (asset) values whether it is a bull or bear market, whilst it is accepted that Diversified Holdings trade at sometimes many multiples of their Asset values and are evaluated more on their earnings (p/e).
As I understand , this indicates the limitations of mathematical computations/ forecasting techniques like, Intrinsic value, NAV, P/E multiplies in judging market prices. There is no THEORY to say these are the ultimate indicators to determine / forecast market prices and there are STRONG opinions to contrary.

Sorry, not knowledgeable in Accounting aspects or familiar with company financials , to comment on third and fourth issues.

24Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 9:38 am

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
There is a very good reason why investment trusts trade at discounts. It is not uncommon and also occurs in the UK. Just google investment trust trading at discounts and see the number of hits that come up.

The primary reason is that a lot of the investment trusts are not managed to optimise shareholder returns. Closed investment trusts have to capitalise their gains and return it via dividends and buybacks.

What is the future prospect of an investment trust? It is just the ability to get capital gains - if those gains are not capitalised and returned what's the point. You would just be going on a roller coaster ride.

-------------------------------------------

Investment holding firms are a different story to investment trusts. Investment holding firms have the ability to dispose or purchase business units - controlling stakes have controlling premiums. The holding firms don't have the debt levels that the individual business units.

25Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 10:17 am

Antonym


Vice President - Equity Analytics
Vice President - Equity Analytics
An investment trust is like a box containing shares; the trust manager can buy or sell these shares, with the long term objective of maximizing profit. To my simple mind, the value of the box is equal to the value of the shares.

A holding company is like a box containing business units. The Board of Directors can invest in or divest these business units, with the long term objective of maximizing profit. Same difference: The value of this box is equal to the value of the business units.

PS:
1. Business units (and their shares) are valued based on their future prospects; DCF is my favorite valuation tool.
2. I could never fully appreciate the concept of controlling premiums.
3. Historically most investment trusts have traded at a discount. But I don't understand why you would pay less for the box than you would for its contents.

26Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 11:21 am

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Antonym wrote:An investment trust is like a box containing shares; the trust manager can buy or sell these shares, with the long term objective of maximizing profit. To my simple mind, the value of the box is equal to the value of the shares.

A holding company is like a box containing business units. The Board of Directors can invest in or divest these business units, with the long term objective of maximizing profit. Same difference: The value of this box is equal to the value of the business units.

PS:
1. Business units (and their shares) are valued based on their future prospects; DCF is my favorite valuation tool.
2. I could never fully appreciate the concept of controlling premiums.
3. Historically most investment trusts have traded at a discount. But I don't understand why you would pay less for the box than you would for its contents.

Yes this is what I said. But the trusts are not as well managed as the business units. If they were they would be capitalising gains and returning it to the shareholders. They will go for a rights if they need capital for another great opportunity. This is how it should work!

If this does not happen then the dividends from investments will be used up by management fees and the capital gains may never be realised in a down trend.



Controlling premiums are a fact of life. Companies are governed according to the Articles of Association and as long as those provisions do not break the Companies Act and the Takeover Act then the Articles can be held up by any court.

A controlling stake gives you the ability to alter the Articles and control the Board of Directors i.e. have provisions where shareholders of more than 10% can appoint directors. Apart from that the 10% holder can also give notice for an EGM and sack the board if more than 50% in the room are willing to accept it. Normal turnout is around 60% of the shareholders and hence that is why 30% is the mandatory offer level.

27Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 12:18 pm

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
[quote="rainmaker"]There is a very good reason why investment trusts trade at discounts. It is not uncommon and also occurs in the UK. Just google investment trust trading at discounts and see the number of hits that come up.

The primary reason is that a lot of the investment trusts are not managed to optimise shareholder returns. Closed investment trusts have to capitalise their gains and return it via dividends and buybacks.

What is the future prospect of an investment trust? It is just the ability to get capital gains - if those gains are not capitalised and returned what's the point. You would just be going on a roller coaster ride.

-------------------------------------------
Investment holding firms are a different story to investment trusts. Investment holding firms have the ability to dispose or purchase business units - controlling stakes have controlling premiums. The holding firms don't have the debt levels that the individual business units.
[quote="rainmaker"]


@Rainmaker - According to you, there is a very good reason why investment trusts trade at a discount and the primary one is that they are not managed to optimize shareholder returns.
Why are they not managed to optimize shareholder returns ? The mantra for all companies is to maximise shareholder returns. Thats the whole point. For eg companies like CINV & GUAR are 10 baggers todate even in this slump from 4 years ago. They have created shareholder value through
capital gains, splits, bonuses, discounted rights and share repurchases.
At this point, worth clarrifying that their are 2 types of Investment Trusts i.e. Open ended and closed ended. The type we are referring to are open ended i.e. CIT, CFI, CINV, GUAR, NAMAL etc.
The close ended ones are Unit Trusts / Mutual Funds etc. I think you are confusing the term "trust" again. In our local context, all our Investment Trusts are Investment holding companies and have the ability to purchase or dispose business units or minority holding stakes. Weather it is a Investment Trust or Investment Holding company (the same), we are comparing this to a Diversified Holding Company (JKH, HEMAS, CARSONS, CFLB etc and are trying to figure out weather the premiums / discounts currently seen, are warranted, especially for minority shareholder i.e. you and me (and not controlling Interests).

" What is the future prospect of an investment trust? It is just the ability to get capital gains - if those gains are not capitalised and returned what's the point. You would just be going on a roller coaster ride."
The future prospect of an Investment Trust (or Holding company) depends on what underlying securities it holds in its portfolio. there are 4 sources of Income, Dividends, Interest Income, Capital gains and Share of associate company profit (if it owns over 20 % stake). If the underlying securities in the portfolio does well, then dividends and capital gains accrue (same as to the holder of a minority stake in a diversified holding company). In fact, the distinct advantage is that a Investment holding company or trust is more "diversifed" than even the diversified holding companies business units and we all know the diversification benefits in stock / company holdings.

" Investment holding firms are a different story to investment trusts. Investment holding firms have the ability to dispose or purchase business units - controlling stakes have controlling premiums. The holding firms don't have the debt levels that the individual business units."

All 3 statements are incorrect. Investment Trust = Investment Holding Company is different to Diversified Holding Company. All have to ability to buy / sell minority or controlling stakes if its their strategy or plan. controlling stakes have controlling premiums for controlling interests (and not you and me - minority interests). The holding company's debt level is the sum of the parts of the individual business units. it cannot be any other way !

@Knocknobbler - Very good points. very relevant and worth reading again.

@ Antonym - As usual, you hit the nail right on the head !










28Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 1:50 pm

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
[quote="The Alchemist"][quote="rainmaker"]There is a very good reason why investment trusts trade at discounts. It is not uncommon and also occurs in the UK. Just google investment trust trading at discounts and see the number of hits that come up.

The primary reason is that a lot of the investment trusts are not managed to optimise shareholder returns. Closed investment trusts have to capitalise their gains and return it via dividends and buybacks.

What is the future prospect of an investment trust? It is just the ability to get capital gains - if those gains are not capitalised and returned what's the point. You would just be going on a roller coaster ride.

-------------------------------------------
Investment holding firms are a different story to investment trusts. Investment holding firms have the ability to dispose or purchase business units - controlling stakes have controlling premiums. The holding firms don't have the debt levels that the individual business units.
@rainmaker wrote:

@Rainmaker - According to you, there is a very good reason why investment trusts trade at a discount and the primary one is that they are not managed to optimize shareholder returns.
Why are they not managed to optimize shareholder returns ? The mantra for all companies is to maximise shareholder returns. Thats the whole point. For eg companies like CINV & GUAR are 10 baggers todate even in this slump from 4 years ago. They have created shareholder value through
capital gains, splits, bonuses, discounted rights and share repurchases.
At this point, worth clarrifying that their are 2 types of Investment Trusts i.e. Open ended and closed ended. The type we are referring to are open ended i.e. CIT, CFI, CINV, GUAR, NAMAL etc.
The close ended ones are Unit Trusts / Mutual Funds etc. I think you are confusing the term "trust" again. In our local context, all our Investment Trusts are Investment holding companies and have the ability to purchase or dispose business units or minority holding stakes. Weather it is a Investment Trust or Investment Holding company (the same), we are comparing this to a Diversified Holding Company (JKH, HEMAS, CARSONS, CFLB etc and are trying to figure out weather the premiums / discounts currently seen, are warranted, especially for minority shareholder i.e. you and me (and not controlling Interests).

" What is the future prospect of an investment trust? It is just the ability to get capital gains - if those gains are not capitalised and returned what's the point. You would just be going on a roller coaster ride."
The future prospect of an Investment Trust (or Holding company) depends on what underlying securities it holds in its portfolio. there are 4 sources of Income, Dividends, Interest Income, Capital gains and Share of associate company profit (if it owns over 20 % stake). If the underlying securities in the portfolio does well, then dividends and capital gains accrue (same as to the holder of a minority stake in a diversified holding company). In fact, the distinct advantage is that a Investment holding company or trust is more "diversifed" than even the diversified holding companies business units and we all know the diversification benefits in stock / company holdings.

" Investment holding firms are a different story to investment trusts. Investment holding firms have the ability to dispose or purchase business units - controlling stakes have controlling premiums. The holding firms don't have the debt levels that the individual business units."

All 3 statements are incorrect. Investment Trust = Investment Holding Company is different to Diversified Holding Company. All have to ability to buy / sell minority or controlling stakes if its their strategy or plan. controlling stakes have controlling premiums for controlling interests (and not you and me - minority interests). The holding company's debt level is the sum of the parts of the individual business units. it cannot be any other way !

@Knocknobbler - Very good points. very relevant and worth reading again.

@ Antonym - As usual, you hit the nail right on the head !




I'm not confused about trusts and investment holding firms and I'm not talking about unit trusts. My answers are general and not with regards to any particular firm listed on the CSE

Specific to SL, there is a difference between GUAR and VONE. One invests across the board with some concentration to Carsons firms. A firm like this does not own very large stakes (usually just 4% of the portfolio). A firm like VONE is different as it holds very large controlling stakes (30% +) and hence it can experience unexpected capital gain when it disposes it.

Yes both GUAR and VONE are investment holdings but the type and level of investment holding is difference. You cannot compare the two - its like comparing a private equity firm (massive stakes in selective stocks) and a hedge fund (smaller stakes in a wide array of stocks).

As for debt levels, GUAR or VONE will not be accountable for Carsons, Goodhope, SAMP, LB Finance or any of its subsidairy/investment's debt even though they may be consolidated in the accounts --> ASPIC corporation will never be liable for CIFL's obligations even though they would consolidate the accounts

29Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 1:53 pm

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Some constructive discussion is going on here . Well done boys this is how you present opposing views. cheers

30Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 2:18 pm

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Before the comments come rolling in may I add that in order for the holding company to be involved with its investments debt a court case has to filed. Proof has to be provided that funds have been funnelled.

This is a bitter lesson that golden key depositors realised. Ceylinco limited assets were only seized after proof can be provided. Obviously it takes a lot of time to press for court injunctions.

31Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 2:56 pm

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
" Specific to SL, there is a difference between GUAR and VONE. One invests across the board with some concentration to Carsons firms. A firm like this does not own very large stakes (usually just 4% of the portfolio). A firm like VONE is different as it holds very large controlling stakes (30% +) and hence it can experience unexpected capital gain when it disposes it."

GUAR is classified as a Investment Holding or Trust Company. VONE is classified as a Diversified Holding Company. So the only difference is that VONE owns larger controlling stakes, but remember most of these stakes are in DP connected companies and VONE is a vehicle by which he controls these other companies like SAMP, LB, RCL etc so experiencing unexpected capital gain theory is out of the window unless DP decides to exit these business, and we cannot build an argument on that. In fact, he sold his SAMP stake to VONE @ Rs 300 a few years back if i remember right ! so much for capital gains !

"Yes both GUAR and VONE are investment holdings but the type and level of investment holding is difference. You cannot compare the two - its like comparing a private equity firm (massive stakes in selective stocks) and a hedge fund (smaller stakes in a wide array of stocks)".

A private equity firm invests in unlisted equity at early stages and hopes to capitalize at the IPO stage (like WAPO). A Hedge fund invests in various asset classes in a diversified manner with offsetting long and short positions so that risk is zero. GUAR and VONE are neither of these. They both have a bunch of equity investments (some large -some small), and shareholders can expect capital gains and dividends depending on the performance of their underlying investments.

" As for debt levels, GUAR or VONE will not be accountable for Carsons, Goodhope, SAMP, LB Finance or any of its subsidairy/investment's debt even though they may be consolidated in the accounts --> ASPIC corporation will never be liable for CIFL's obligations even though they would consolidate the accounts"

This is a bad example as GUAR is a a subsidiary of Carsons and VONE is the Holding company of DP other Interests. earlier you talked about holding firms don't have the debt levels that the individual business units. this position is incorrect. I am not sure what exact point you are trying to make re debt level and its relevance to our discussion.

32Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 3:24 pm

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Alchemist Corporate law is global and not just unique to SL. The consensus in courts is that holding companies are NOT liable to debts of subsidiary firms or associates. This is very important in the case of large listed holding firms.

Take Hutchison Whampoa or Singapore based Wilmar group ( Wilmar is in the same business as Carsons whilst Hutchison Whampoa owns telecom and ports). They all trade at superior PE levels. Other examples include New World which is like a bigger version of Colombo Land.

Just google "holding company liable for subsidiary debts" and see what comes up. Legal reality is different to accounting reality.

There are exceptions to the above which are hard to justify and prove in the courts.

---------------------------------------------------

Ok after that important point diversified holding firms holds "businesses" whilst investment holding firms hold "investments" ---> big difference here

Diversified holding firms can dispose it's "businesses" at higher values due to goodwill, controlling premium etc etc

Investment holding firms can dispose "investments" at market price +/- deal premium for large deals.

A recent sale transaction with a bank that resulted in a large capital gain should explain the above difference




33Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 3:59 pm

Antonym

Antonym
Vice President - Equity Analytics
Vice President - Equity Analytics
@rainmaker wrote:...The consensus in courts is that holding companies are NOT liable to debts of subsidiary firms or associates.
If the subsidiary is a limited liability company, the holding company would not be legally liable for the subsidiary's debts.
However, the holding company would sometimes provide a corporate guarantee for the subsidiary's borrowings; in such cases, the guarantees would be enforceable in courts, despite of the 'limited liability' concept.

@rainmaker wrote:...Diversified holding firms holds "businesses" whilst investment holding firms hold "investments" ---> big difference here...
The difference is primarily in the ability to exercise control over business decisions: possible in the case of holding companies, not possible in the case of investment trusts.

Which brings me to the crux of the matter:
Why should holding companies trade at a premium to the sum of its businesses?
Why should investment trusts trade at a discount to the sum of its investments?

34Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 4:32 pm

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Anyone who want to keep the difference simple

Holding Company : has usually controlling interests ( ie : in votings shares ) in another business. They have subsidiaries and associates.

Investment Trust : A company which holds a diversified portfolio of shares of other businesses

So to get back to the original question, RHL is a holding company as per the name and though its controlling interests are mainly in agro business ( Food and beverage) it is starting to get diversified into other sectors. I see no harm in saying it can be a diversified holding company in the future.

Right now it is trading at attractive valuations. After COCO right issue, RHL price also got dragged down. We recently saw the directors also buying from main share holder ( Renuka Group) . They are exporting to several foregin counrties and is also growing the presence in domestic market through RAL and COCO. Though their revenue has grown massively over the years, the profit has not shown big increases due to high operational expenses. This is partly positive as the business is growing. They are making consistent good aquiisitions also. However the group need to start showing better profits as it has been some quarter since anything outstanding has been seen.
Also on the postive side their loans and liabities has reduced drastically by Dec 2012.


Whatever said and done both Voting and non voting are trading at very low prices if you study the history over the past fewyears. During last june it dropped below Rs 28 but since then their financial and group structuring also has changed and is tradign at better valuations.




Last edited by slstock on Fri Mar 29, 2013 4:40 pm; edited 1 time in total

35Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 4:36 pm

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@Antonym wrote:
@rainmaker wrote:...The consensus in courts is that holding companies are NOT liable to debts of subsidiary firms or associates.
If the subsidiary is a limited liability company, the holding company would not be legally liable for the subsidiary's debts.
However, the holding company would sometimes provide a corporate guarantee for the subsidiary's borrowings; in such cases, the guarantees would be enforceable in courts, despite of the 'limited liability' concept.

@rainmaker wrote:...Diversified holding firms holds "businesses" whilst investment holding firms hold "investments" ---> big difference here...
The difference is primarily in the ability to exercise control over business decisions: possible in the case of holding companies, not possible in the case of investment trusts.

Which brings me to the crux of the matter:
Why should holding companies trade at a premium to the sum of its businesses?
Why should investment trusts trade at a discount to the sum of its investments?

Correct. If guarantees are there then they can be held up in court ---> If you give a personal guarantee to your company the bank can take you to court. One of the reasons why foreign banks get into trouble is that they give guarantees to their less known subsidiaries.... hence these subs also get the AAA credit rating

As for your other question, holding companies trade at a premium because of the controlling power. There should never be a question as to why holding companies trade at premiums as those premiums are justified. There is a big difference between holding a stock and being able to control a companies assets, actions, future decisions and goals.

Also sometimes the sum of the parts are worth less without them being together. For example without the logisitics subsidiary (to transport oil/coal/gas/gold), the mining subsidiary is not worth as much etc etc.

Investment firms trade at a discount due to a number of reasons. Sometimes it may be market inefficiency. Sometimes it may be because the market does not believe the underlying investments can be traded at the current market price.

At other times it is due to a belief that the investment trust will never return the funds at the NAV............. Investing in GUAR is not like investing in a unit trust where the unit price is computed daily. In such a case you buy the NAV and you get back the NAV.

Can you say the same to GUAR??? No, you don't get the NAV, you just get the market price. So there is a risk Razz Razz Razz



Last edited by rainmaker on Fri Mar 29, 2013 4:39 pm; edited 1 time in total

36Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 4:37 pm

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
[quote="Antonym"]
@rainmaker wrote:...The consensus in courts is that holding companies are NOT liable to debts of subsidiary firms or associates.
If the subsidiary is a limited liability company, the holding company would not be legally liable for the subsidiary's debts.
However, the holding company would sometimes provide a corporate guarantee for the subsidiary's borrowings; in such cases, the guarantees would be enforceable in courts, despite of the 'limited liability' concept.

@rainmaker wrote:..

Which brings me to the crux of the matter:
Why should holding companies trade at a premium to the sum of its businesses?

Why should investment trusts trade at a discount to the sum of its investments?

@ rainmaker -The consensus in courts is that holding companies are NOT liable to debts of subsidiary firms or associates.
I have not heard about such a consensus ,ans surprised to hear that sort of thing. .
With regard debt of a company , there is a Contractual Agreement and security documents. Security document may be a mortgage bond if an asset is mortgaged or Guarantee Bond document if guaranteed by a third party. These documents clearly specify :
1 who is the borrower or borrowers
2. amount borrowed
3 rate of interest
4 repayment programme
5. recovery procedure in case of default ( lender, taking possession of the asset mortgaged or suing the Guarantor, depending on the case).

Other than what is specified in this legal contractual documents there are NO responsibilities, by any connected parties : ie directors, shareholders, subsidiaries, associates, holding companies. I hope this is clear now.

Hope we can go back to the discussion on crux of the matter.



37Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 4:44 pm

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
@knockknobbler wrote:

@ rainmaker -The consensus in courts is that holding companies are NOT liable to debts of subsidiary firms or associates.
I have not heard about such a consensus ,ans surprised to hear that sort of thing. .
With regard debt of a company , there is a Contractual Agreement and security documents. Security document may be a mortgage bond if an asset is mortgaged or Guarantee Bond document if guaranteed by a third party. These documents clearly specify :
1 who is the borrower or borrowers
2. amount borrowed
3 rate of interest
4 repayment programme
5. recovery procedure in case of default ( lender, taking possession of the asset mortgaged or suing the Guarantor, depending on the case).

Other than what is specified in this legal contractual documents there are NO responsibilities, by any connected parties : ie directors, shareholders, subsidiaries, associates, holding companies. I hope this is clear now.

Hope we can go back to the discussion on crux of the matter.


Correct if there is a guarantee from the holding firm. But if there is not then there is no way in which holding firms are liable for subsidiaries.

There are ways to break the above rule .... fraud, tunnelling, mismanagement by common directors or by proving that the holding firm and subsidiary are "one economic unit"

The last point is the one which most prosecutors use.

I answered the question in the previous post. The inability for holding firms to be liable for debts is a very big positive. In some situations, the holding firm may be the biggest lender Wink

38Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 5:11 pm

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@Antonym wrote:Which brings me to the crux of the matter:
Why should holding companies trade at a premium to the sum of its businesses?
Why should investment trusts trade at a discount to the sum of its investments?
@Rainmaker wrote:
As for your other question, holding companies trade at a premium because of the controlling power. There should never be a question as to why holding companies trade at premiums as those premiums are justified. There is a big difference between holding a stock and being able to control a companies assets, actions, future decisions and goals.
Investment firms trade at a discount due to a number of reasons. Sometimes it may be market inefficiency. Sometimes it may be because the market does not believe the underlying investments can be traded at the current market price.

At other times it is due to a belief that the investment trust will never return the funds at the NAV............. Investing in GUAR is not like investing in a unit trust where the unit price is computed daily. In such a case you buy the NAV and you get back the NAV.

Can you say the same to GUAR??? No, you don't get the NAV, you just get the market price. So there is a risk


@Rainmaker - the premium is justified for controlling interest and not you and me i.e. minority interest. thats the essential difference. you and i dont control anything so why pay the premium?
Talking about GUAR and returning money at NAV - They did so in late 2010 through a repurchase at NAV so it is in the realm of possibilities ! In fact, i could argue that if you were to re-construct GUAR's Portfolio from scratch, it would cost more than current NAV - True for all Investment Holding / Trust companies - RENU (although classified as Hotel sector), CABO (Land and Property sector), CIT, CFI, CINV, GUAR, COLO (motor), NAMAL etc. That is why, last year, Warren Buffet made an offer to repurchase Berkshire Hathaway Shares at 10 % over NAV.
So as you rightly point out, it may be market inefficiency.
As Antonym stated, opportunities come disguised as market inefficiencies, anomalies, etc. But it takes common sense and patience to spot, believe and exploit them too. Thats why Antonym should be the Sultan Wink and you should go to church - its Good Friday ! Smile

39Renuka Holdings - Page 2 Empty Re: Renuka Holdings Fri Mar 29, 2013 5:54 pm

knockknobbler


Manager - Equity Analytics
Manager - Equity Analytics
@The Alchemist

Thats why Antonym should be the Sultan Wink and you should go to church - its Easter Friday ! Smile


Bit puzzled here....,
Based on the submissions above, is he more qualified for the post of "Preacher " ?


40Renuka Holdings - Page 2 Empty Re: Renuka Holdings Sun Mar 31, 2013 3:03 pm

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
My main concern about RHL is their management has been selling RHL/COCO/RAL shares for long time. Unlike CARS group, RHL management is in an ideal position to announce a right issue at any given time. It’s really depressing to see their unstoppable sellings. Otherwise RHL would have been over at least Rs45-50 mark for sure.
I suspect they will keep selling their stake until Renuka Group ltd hold 51% of RHL shares. Good thing is they are not far from 51% of RHL.

RHL needs to look into the Tourism sector at some point. Recent group reconstruction may lead to that. That’s one of their main areas yet to be explored.

RHL is still a growing small to medium size business. When we compare the size of RHL, their recent acquisitions are pretty impressive.

41Renuka Holdings - Page 2 Empty Re: Renuka Holdings Sun Mar 31, 2013 3:11 pm

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
@UKboy wrote:Unlike CARS group, RHL management is in an ideal position to announce a right issue at any given time. It’s really depressing to see their unstoppable sellings. Otherwise RHL would have been over at least Rs45-50 mark for sure.
I suspect they will keep selling their stake until Renuka Group ltd hold 51% of RHL shares. Good thing is they are not far from 51% of RHL.


The last selling.buying was inter party. After 2 right issues for RAL and COCO and killing the share price of RHL from Rs 50 to 30 it will be the most unwise decision to do a 3rd right issue in the group at this time. Else it will be like LCEY group right magicians. Atleast they should wait until COCO, RAL recover in price along with RHL until they een think about any such decision .

Now if they do go for a right issue at this time, I would loose faith in this compnay and accuse them for treating their minority holders like xxxx.




42Renuka Holdings - Page 2 Empty Re: Renuka Holdings Sun Mar 31, 2013 3:52 pm

rainmaker


Assistant Vice President - Equity Analytics
Assistant Vice President - Equity Analytics
Yes another rights would be like twisting the dagger.

43Renuka Holdings - Page 2 Empty Re: Renuka Holdings Sun Mar 31, 2013 4:23 pm

The Alchemist


Senior Manager - Equity Analytics
Senior Manager - Equity Analytics
@slstock wrote:
@UKboy wrote:Unlike CARS group, RHL management is in an ideal position to announce a right issue at any given time. It’s really depressing to see their unstoppable sellings. Otherwise RHL would have been over at least Rs45-50 mark for sure.
I suspect they will keep selling their stake until Renuka Group ltd hold 51% of RHL shares. Good thing is they are not far from 51% of RHL.


The last selling.buying was inter party. After 2 right issues for RAL and COCO and killing the share price of RHL from Rs 50 to 30 it will be the most unwise decision to do a 3rd right issue in the group at this time. Else it will be like LCEY group right magicians. Atleast they should wait until COCO, RAL recover in price along with RHL until they een think about any such decision .

Now if they do go for a right issue at this time, I would loose faith in this compnay and accuse
them for treating their minority holders like xxxx.


Re RHL - No need for Rights. They will next spin of Renuka Agro Exports Ltd, (via IPO), which they own 96 %, a unlisted company which is the parent company of COCO or Renuka Shaw Wallace as it is now known. Renuka Agro not to be confused with RAL (Renuka Agri Foods Plc) !

44Renuka Holdings - Page 2 Empty Re: Renuka Holdings Sun Mar 31, 2013 4:31 pm

Slstock

Slstock
Director - Equity Analytics
Director - Equity Analytics
Hmm, interesting thought.

Btw RAL is also adding to their plate consistently now.




@The Alchemist wrote:
@slstock wrote:
@UKboy wrote:Unlike CARS group, RHL management is in an ideal position to announce a right issue at any given time. It’s really depressing to see their unstoppable sellings. Otherwise RHL would have been over at least Rs45-50 mark for sure.
I suspect they will keep selling their stake until Renuka Group ltd hold 51% of RHL shares. Good thing is they are not far from 51% of RHL.


The last selling.buying was inter party. After 2 right issues for RAL and COCO and killing the share price of RHL from Rs 50 to 30 it will be the most unwise decision to do a 3rd right issue in the group at this time. Else it will be like LCEY group right magicians. Atleast they should wait until COCO, RAL recover in price along with RHL until they een think about any such decision .

Now if they do go for a right issue at this time, I would loose faith in this compnay and accuse
them for treating their minority holders like xxxx.


Re RHL - No need for Rights. They will next spin of Renuka Agro Exports Ltd, (via IPO), which they own 96 %, a unlisted company which is the parent company of COCO or Renuka Shaw Wallace as it is now known. Renuka Agro not to be confused with RAL (Renuka Agri Foods Plc) !

45Renuka Holdings - Page 2 Empty Re: Renuka Holdings Sun Mar 31, 2013 4:57 pm

UKboy

UKboy
Senior Vice President - Equity Analytics
Senior Vice President - Equity Analytics
@slstock wrote:
@UKboy wrote:Unlike CARS group, RHL management is in an ideal position to announce a right issue at any given time. It’s really depressing to see their unstoppable sellings. Otherwise RHL would have been over at least Rs45-50 mark for sure.
I suspect they will keep selling their stake until Renuka Group ltd hold 51% of RHL shares. Good thing is they are not far from 51% of RHL.


The last selling.buying was inter party. After 2 right issues for RAL and COCO and killing the share price of RHL from Rs 50 to 30 it will be the most unwise decision to do a 3rd right issue in the group at this time. Else it will be like LCEY group right magicians. Atleast they should wait until COCO, RAL recover in price along with RHL until they een think about any such decision .

Now if they do go for a right issue at this time, I would loose faith in this compnay and accuse them for treating their minority holders like xxxx.

COCO rights is probably the most hideous right issue I have seen in recent times & not surprised to know that it was not completed with 100% success.

Nope SLS I too dont think they will go for a right issue at now ( I would bet JKH to go for a right issue earlier than RHL).

I just wanted to tell that Rajiyah family is in such ideal position to go for a right issue (bring new money from the minority) as they wish while in the pilot seat.

I do hold RHL shares & if the price is right (for me) I would buy more.




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