BFIL

                                                BF INVESTMENTS LTD.

BFIL is the erstwhile investment division of BF Utilities Ltd. that was demerged in FY10.

CMP = 42/-

MCap. = 160Cr.

Networth = 618/-

Debt = 0

1.)   CASH :

Intercorporate Deposit = Rs.170Cr. (Hence a net-net stock)

Interest receivable = Rs.30.5Cr.

Investment in Liquid MF = Rs.19.5Cr.

Total Cash & Cash Equivalents = Rs.220Cr.

EV = ( - Rs.60Cr.)

Hence, BFIL is a net-net stock.

2.)   QUOTED INVESTMENTS :

Company Name : No. of shares held x CMP = Value of Holding

Automotive Axles – 53.67 lakh shares x Rs.360/- = Rs.236Cr.

Bharat Forge - 58 lakh shares x Rs.300/- = Rs.174Cr

Kalyani Steels Ltd. – 1.7Cr. shares x Rs.60/- = Rs.102Cr.

Kalyani Investment Company Ltd. – 17 lakh shares x Rs.380/- = Rs.65Cr.

HIKAL - 4.36 lakh shares x Rs.320/- = Rs.14Cr

Kalyani Forge – 5.69 lakh shares x Rs.180/- = Rs.10Cr.

Total Market Value of Quoted Investments = Rs.601Cr.

Book Value of Quoted Investments = Rs.220Cr.

Hence the stock is trading at 73.37% discount to the market value of its quoted investments.

3.)   UNQUOTED INVESTMENTS :

Book Value of Unquoted Investments = Rs.168Cr.

4.)   GRAND TOTAL = CASH + QUOTED INVESTMENTS + UNQUOTED INVESTMENTS = Rs.990Cr. or 84% discount to intrinsic value.

    5.) CASH FLOW :

Interest Income = Rs.23.3Cr.

Dividend Income = Rs.25Cr.

Reoccurring PAT = 43.5Cr. (Dividend Income + Interest Income)

PE = 3.67x

All Holding cos. derive value from the underlying value of their holdings but the ones who also make profits through Dividend & Interest Incomes (which are comparable to their MCap) can be valued like any other routine company which earns a profit from its operating business (a cash flow based valuation can be applied as opposed to an asset based valuation).     

Hence, BFIL is not a typical holding company as even apart from the asset value, it has got sustainable & reoccurring operating cash flows in the form of Dividends & Interest Income to the tune of Rs.43.5Cr.per annum. The dividend income of BFIL is a function of the payout & performance of BFL, KSL & Auto Axles.

There is no reason why BFIL should trade at a cash flow yield of 27% at CMP.

6.)   Share Holding Pattern – INSTITUTIONAL EXODUS :

Institutions                                           Promoters

31/12/10 -                      10.89%                                                 66.09%

31/03/11 –                     10.08%                                                 66.12%

Jun-2012 Mar-2012 Dec-2011 Sep-2011 Jun-2011 Promoter and Promoter Group 70.91 % 70.91 % 70.91 % 68.11 % 66.92 % Indian 70.91 % 70.91 % 70.91 % 68.11 % 66.92 % Foreign -- -- -- -- -- Public 29.09 % 29.09 % 29.09 % 31.89 % 33.08 % Institutions 2.83 % 2.83 % 5.58 % 6.64 % 9.49 % FII 2.38 % 2.38 % 5.13 % 6.19 % 9.04 % DII 0.45 % 0.45 % 0.45 % 0.45 % 0.45 % Non Institutions 26.26 % 26.26 % 23.51 % 25.25 % 23.59 % Bodies Corporate 8.37 % 8.50 % 8.36 % 10.29 % 9.40 % Custodians -- -- -- -- -- Total 3,76,67,628 3,76,67,628 3,76,67,628 3,76,67,628 3,76,67,628

As is clear from the table above, Institutional Investors exodus has caused this irrational & faulty price.   

BFIL has been unfairly been valued like holding co.

7.)    TRIGGERS :

I.)                 BFL, KSL & Auto Axles increase their dividends.

II.)              BFIL declares dividend.    

8.)   PORTFOLIO WEITAGE = 1%