Buy Calls – Tata Investment Corp
Investors with a two to three year investment horizon can consider accumulating the shares of Tata Investment Corp (TIC), the Tata Group’s listed investment arm.
The stock is trading at a significant discount to the value of its investment book, which comprises mainly of Tata Group companies. TIC is a good defensive option with low volatility, as the stock’s beta against the BSE 500 is 0.43. This, coupled with steep discount to the underlying book value, reduces downside.
The company’s December 2009 Net Asset Value (NAV) per share was Rs 765. At its current market price of Rs 492, the stock is trading at a 35 per cent discount even to this NAV. This discount is likely to be wider today as the company’s top holdings (Tata Chemicals, Tata Steel, Tata Motors, Tata Tea, Voltas) have appreciated further from their December levels, on the back of improved prospects.
The company also holds unquoted investments in Tata Asset Management and National Stock Exchange which may provide significant scope for value unlocking as they are captured at cost.
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