Unlocking value for shareholders

Owner groups should understand that the long-term interests of different shareholder groups, be it minority or majority, are always aligned

Companies must be managed in a manner so as to create maximum value for all its stakeholders. Over the past few years, several corporate houses have tried and undertaken various steps such as demerger, delisting, buyback, open offers and so on. However, there is hardly any example of a holding company unlocking intrinsic value, especially for its minority shareholders. We all know, in India it is not unusual to find holding companies quoting at massive discounts compared to the sum of the parts valuation of their constituents. At times, these discounts can go up to as much as 70-90 per cent of the sum-of-the-parts valuations of quoted/listed investments. Some of the reasons cited for such discounts are poor corporate governance, inconsistent or volatile dividend policies and numerous deterrents in friendly/hostile takeovers. Also, in several situations, formation of these holding companies appears irrational; the parts of holding companies are completely unrelated businesses serving no purpose or logic except helping promoters or promoter-families continue their control.


About gfilesmagazine

gfiles is the country's first independent magazine written, designed and produced for India's civil services—the vast and formidable network of bureaucracies and public sector organisations that provides continuity and stability to this nation's governance.
This entry was posted in Governance. Bookmark the permalink.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s