Investment in Holding company results in sub-par returns over listed subsidiaries, prime example being Bajaj Finserve which has grossly underperformed Bajaj Finance, its listed subsidiary by a wide margin

AU Small Finance’s impressive track record on NPAs tainted due to recent spike in NPAs due to lockdown and stress in SMEs
September 7, 2021
L&T Finance limping back to normalcy in operations but weak business model as revealed during the NBFC crisis is a concern area
September 7, 2021

Bajaj Finserv is the holding company of Bajaj Finance, Bajaj Allianz General Insurance and Bajaj Allianz Lic Insurance. There subsidiary companies have been performing well with Bajaj Finance being the best performer. There is considerable volatility in the insurance business due to businesses being in investment phase; however, long term prospects are good. Our view on holding companies is not positive as value unlocking is generally avoided by promoters. This is for this reason that we have nil weight view on Bajaj Finserv. We prefer a switch to Bajaj Finance rather than holding Bajaj Finserv. This view is supported by a 131 times return in Bajaj Finance versus a 27 times return in Bajaj Finserv over the past 10 years – 27-08-2021 Price: 16,198.70 Rating: Nil Weight Recommendation: Sell


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