Ganges Securities Ltd
(BSE Code: 540647) (CMP: Rs.57.50) (FV: Rs.10) (TGT: Rs.100) By Bikshapathi Thota
Ganges Securities Ltd (GSL) was incorporated on 30 March 2015, in order to run businesses related to investments, tea, property and professional services. It is a Birla group company, which was demerged from Upper Ganges Sugar & Industries Ltd (Upper Ganges) last year. Pursuant to a Composite Scheme of Arrangement by the regulatory authorities, the tea and investment business of Upper Ganges was transferred to GSL. Subsequently, its tea business was transferred to Cinnatolliah Tea Ltd, which owns a Tea garden at North Lakhimpur in Assam with an installed capacity of 12.5 lakh kg of black tea. Currently, GSL is engaged in investment activities which mainly comprise investments in Uttar Pradesh Trading Company Ltd, a RBI-registered NBFC primarily engaged in investments in various market and other securities.
Generally, holding companies trade at 70% discount to their NAV. The quoted holding value of GSL is Rs.280 crore (Rs.255 crore of holdings and Rs.25 crore of bank balance), i.e. 82% of its holdings value. It is a debt-free company.
Apart from being a holdings company, it runs its tea business through Cinnatolliah Tea Ltd. In FY18, its tea business contributed Rs.5 crore to its bottom-line. Even if take the value of its tea business as Rs.100 crore on a conservative basis, its total value works out to Rs.380 crore, which gives a value of Rs.350/share. At 70% discount to its NAV, which is a usual trend for holding companies, its fair value works out to Rs.105/share. Currently, the stock trades at 0.5x book value and 5.5x to FY18 earnings, which is very attractive amongst holding companies. Further, the prospects of GSL’s investments and tea businesses also look bright. The stock has the potential to double within a year.