BNK Capital – Hidden deep value

BNK Capital is a small finance company with experience of over several decades. The company provides brokering services across the various products such as equities, commodities etc and serves several HNIs and corporates.

The interesting part is the market value of the investment the company holds. Some of the major investments are:

As on 18th Feb, 2010
Name Qty CMP Value (Cr)
CESC Ltd 30,17,351 378.00 114.06
India Foils Ltd. 2,24,000 10.00 0.22
Mcleod Russel Ltd. 2,74,205 234.00 6.42
KEC International Ltd. 3,75,105 577.00 21.64
Zensar Technologies Ltd. 4,200 286.00 0.12
Jaipraksh Associates 37,500 135.00 0.51
Total 142.97
* Co holds a lot of other investments also totalling 4-5 Cr

At CMP of about 42, the co’s own Mcap is close to 25 Cr while the value of marketable investments on Balance sheet is 143 Cr!! Hence the company is available at a discount of 82.65% to the value of investments. Similar valuations were once found in CHI Investments too, which was then our favorite and yielded very good returns.

Yes, many of the similar finance companies trade at discounts to their market value of investments, but such discounts are usually not more than 30-35%. Here we are getting a company at 83% discount.

68 thoughts on “BNK Capital – Hidden deep value”

  1. Hello

    Could you please send me the annual reports for the last 3 years. Once again would be very interested in knowing how you find this information as websites don’ t seem to have this.

    Thanks.

  2. Hello

    Could you please send me the annual reports for the last 3 years. Once again would be very interested in knowing how you find this information as websites don’ t seem to have this.

    Thanks.

  3. Ayush

    Thanks for sending the annual report. Agree with you completely that is grossly mispriced security. Initiated a small position in this company and will add more. Have been very impressed with some of the recommendations so far – BNK, Majestic Auto, etc.

    Thx.

  4. Ayush

    Thanks for sending the annual report. Agree with you completely that is grossly mispriced security. Initiated a small position in this company and will add more. Have been very impressed with some of the recommendations so far – BNK, Majestic Auto, etc.

    Thx.

  5. Pingback: Majestic Auto
  6. Check these bulk deals:

    23/6/2010 500069 BNK Cap Markets BRIJNATH KHANDELWAL AND CO. B 47901 41.26
    22/6/2010 500069 BNK Cap Markets BRIJNATH KHANDELWAL AND CO. B 37970 40.20

  7. Dear Ayush,

    Is there any update on BNK capital there is a sudden increase in price and volumes. Also I remember that the promoters are to convert their warrants at Rs 46 per share sometime around now…
    Can you also tell me how do you see this stock playing out. It has a abnormally large exposure to one company – CESC (which is itself a good company with a stable rate of return and is somewhat under-priced compared to other power cos) and it does not look like it will sell the shares CESC is not likely to announce any major dividends..
    So how do you see the value unlocking happening?

  8. BNK Capital is one of the most undervalued holding sorta company. The company is available at almost 80% discount to the value of investments it holds. Typically holding cos trade at 50% discount.

    Yes, CESC is a good stock and should do well going forward….hence BNK stands to benefit by way of both – improvement in value of investments and reduction in discount going forward.

  9. Dear Ayush,

    I am also following another company closely – NAGREEKA CAPITAL AND INFRASTRUCTURE. This seems to be at 90% discount to its intrinsic value. Can you please check on this and maybe do some research.

    Best regards,
    Sanjay

  10. Dear sanjay,

    Can you guide me how to find the intrinsic value? Pls suggest some formula for that or good sites. I am new to the value investing

  11. Nagreeka Capital holds a big chunk of shares in Sterlite Industries and Sterlite TEchnologies. The market capitalization of Nagreeka based on CMP is about 45 Crores. The holding value in these companies is close to 500 Crores. These shares were purchased at almost 5 ~ 10 crores, and hence they do not have any massive debt. The main issue with this company I feel is its promoters, who dont have the best corporate governance. I still feel that this share is available very cheap and can be a proxy investment to Sterlite Group and once the promoters get their act tidy, the market will rerate this company from a 'junk' status to 'holding' company status. Most of the holding companies are rate 50% of their holding value. So, I see market price of Nagreeka close to 200 in few years time.

  12. Dear Sanjay,

    I have tracked Nagreeka before. I think one should be careful on this one. I was going through their FY 09 annual report and noticed that the co had suffered losses in derivatives and their holding in Sterlite has reduced by half.

    So please check the same again.

    Regards,

  13. Ayush,can u throw some light on cosfinvest ltd traded only in NSE B.C JINDAL group company,which is holding ASIAN HOTELS ,JINDAL POLY,JINDAL PHOTO.

    Kumar.

  14. Hi Ayush,

    Thanks for the info… I have started following your blog from tomorrow after finding a link from Rohit Chauhan’s blog. Very interesting and informative.

    Can you please tell:

    1. Why holding companies trade at 50% discount?

    2. What kind of corporate governance would you expect from holding companies ?

    3. What category/ industry are they listed on exchanges or moneycontrol, i.e., how to find them!

    Thanks.

  15. Hi Madhav,

    1. Holding cos trade at a discount caus the investments they are holding are not going to be sold in near future.

    2. Many often corporate governance is not very high.

    3. No idea.

    Regards,

  16. We don’t have time specific targets in mind. We feel the stock has the potential to trade above Rs 100 if it gets better discovery.

  17. Hi Ayush Nice work there . Can you also send me the AR of possible at reach(s p a c e )var@rediffmail – replace the word space with underscore _
    Really excellent work and anlysis , also you screener.in is indeed a great concept. Keep the good work going .

  18. Hi Ayush,

    BNK shoots up to Rs 55! Has there any news (bulk deal, takeover etc) or has the market just discovered the idea?

    Thanks,

          1. We don’t have time specific targets in mind. We feel the stock has the potential to trade above Rs 100 if it gets better discovery.

  19. ayush, i look again and again but balancesheet doesnt show any investments worth 142 crs. it says 24cr. If it really has 142cr worth investment. should the balance sheet reflect it. Can you please send me the annual report if not any trouble. I am just trying to learn. thanks

    1. Balance sheet reflects the cost of investment. Go to the schedules and look at the no of share they hold and their market value.

      I have emailed the last 2 yr annual reports.

  20. Can you share your opinion on Binani Industries?
    It’s stake in Binani Cement is 3x its current market cap. Do you believe it has some hidden value or there are some hidden liabilities?

    1. Hi,

      As BNK has comparatively greater value hence we are concentrating more on the same. Also we feel the prospects are bright for its investments – CESC & KEC and hence BNK will get benefit.

      Regards,

  21. Hi Ayush

    There must be some more companies which are tarding below 50% of their holding value.
    Can you please name some more.
    Thanks

  22. Hi Ayush,

    What do you think of Pioneer Investcorp Ltd?
    More than 28 cr cash in hand, trading below book value, recently have got some good names in their management.

    1. Reason for low liquidity may be the small capital of the company and concentration of stock by promoters.

      Movement depends on awareness of the stock in the market…being a small cap co, not many people know about it.

      Regards,

        1. Hi,

          The path to be followed for the investor section on their website is – On home page click on About Us then click on BNK Capital Markets (on the left).

          This will lead you to the investor section.

          Is it compulsory for listed cos to have investor relation section?

          Regards,

          1. Hi Ayush,

            Thanks for the info.

            I don’t know if it is mandatory for a company to have a ‘Investor relations’ section on their website, let alone have a website in the first place. However, without such information, with no annual reports on the company’s website, I would find it difficult to know more about the company just based on other news sources. In this day and age if company does not provide enough information to their existing or would be investors, they are missing out a huge opportunity to show themselves in good light (like transparency, corporate governance). Well formated PDF annual reports with details commentary from the CEO/ MD, vision, strategy, growth in the last few years etc., are useful info which not many other websites can provide, esp., if the company is small or in a new industry which has very little coverage from research analysts.

            Yes, mgmt can eye wash the investors with glossy photos and colorful pdf’s but their has be substance in the balance sheets and profit and loss statements. Just a good website is not definitive. Just my personal views 🙂

      1. Atyush- the stock has tanked down to below Rs 30. Is the value discount getting better with respect to the holding company.. or there is something more then what meets the eye

  23. Board approves Bonus Issue
    BNK Capital Markets Ltd has informed BSE that the Board of Directors of the Company at its meeting held on April 17, 2011, inter alia, have approved the following:

    1. To commensurate with 25th years of completion of the Company’s operation, the Directors have recommended issue of fully paid up Bonus Equity Shares of Rs. 10/- each fully paid up by capitalization of reserves in the ratio of one (1) Bonus Shares for four (4) Equity Shares held as at the record date, to be announced later.

    2. Increase in the Authorised Capital of the Company.

    Like in earlier years the Company shall declare its audited financial results for the financial year March 2011 within stipulated time. As such the Company shall not announce unaudited financial results for the 4th quarter ended March 31, 2011.

  24. BNK Capital Markets recommends dividendMay 28, 2011 14:39The board of BNK Capital Markets in its meeting on 28 May 2011 has recommended dividend at the rate of Re 1 per share (10%) for the financial year ended 31 March 2011.

  25. Dear sir,

    What is ur view on below mentioned stocks at cmp ?

    Ahluwalia contract
    Simplex project
    Madhucon project
    Spml infra
    Patel engineering
    Jai corp
    NCC
    Texmaco infra

    All i hv and hv 50- 250 % of profit kindly suggest me . Should i hold these for long term pls sir 🙂

    Regards,
    Yogi

Leave a Reply

Your email address will not be published. Required fields are marked *