Forgive my ignorance. I was checking Zuari Agro, which has current market cap of 27B INR. Zuari Global which owns 32.08% of Zuari Agro is trading at a 5.7b market cap. Shouldn’t the holding be worth at least 8.7B alone, besides their other assets? What am I missing?
If you check their subsidiary, Zuari Management services, which is wholly owned by Zuari Global, also has 12.08% further stake in Zuari Agro
Yes that’s correct, so total holding is 32.08%
The Market Cap is calculated based on the market value total shares outstanding. In the case on Zuari Global the market value of each share is around 199+ [on 31/11/2017] and Total outstanding shares as of 31st March 2017 is 29,440,604, which makes it 5.8B as you mentioned.
There is something called as holding company discount. Check this post
Maybe someon like @Karthik can shed more light on it.
Shares of Zuari Agro are trading at 630, if should be 8B or higher.
Holding discount makes more sense, but in this particular case, this seems to be a controlling stake and not a minor stake like with other examples?
True. This is because the holding company (Zuari Global) is holding the shares of Zuari Agro from a strategic perspective and not really from a financial gains perspective. If was from a financial gains perspective, then your logic would apply, but then Zuari Global will not really sell its shares in Zuari Agro…hence the discount in valuation.