What is a Conglomerate Discount?
Well, it is basically a concept whereby a sum of parts is valued less than the individual parts in isolation, a situation where 2+2 does not add up to be 4. It is either 3 or 3.5 based on the specific entity we are valuing.
INVESTMENT RATIONALE
While you are making your investment in a company, think of the stock market as a pool of startups trying to get a share of your hard-earned money and think of yourself as a big shot Venture Capitalist, maybe the MD of Sequoia. There are only two things you would see if you were making the investment:
What is the future prospect of the Company?
How financially sound the company is?
RIL currently has interests in oil exploration and refining, Fuel Retail, Media, Retail, Telecommunication and is now tying its shoes to get into e-commerce. The company also has plans to get into infrastructure (construction of smart cities and pod taxis).
While a lot of discussions have happened on its capabilities in oil exploration and petrochemicals, my focus will be on the huge value lying unlocked within the company in its retail business.
Read about the detailed post here.
(This post was written around 5 months ago, the view still holds relevance today. However, some of the data points may not be updated. If you wish to see an hour-long conversation on this post, click here.)