Reliance Capital Limited (RCL) is a diversified financial services holding company promoted by Reliance Group. It has interests in asset management and mutual funds; life and general insurance; commercial finance; equities and commodities broking; wealth management services; distribution of financial products; asset reconstruction; proprietary investments and other activities in financial services.
RCL, being a holding company, as per my calculations, trades at around 50% of its intrinsic value. With de-merger of at least three businesses (Retail Health Insurance, Home Finance and Commercial Finance) on the cards, it is expected that these entities shall be listed on the exchange and will result in unlocking of the shareholder value, which is easy to agree.
Now I am faced with two scenarios. First, whether I should buy reliance capital immediately in which case I will get early access to these de-merged entities as and when the de-merger gets effected. In this case, I will also be left with the holding company sans these three businesses which personally I would not want to keep. Second, I could buy into these entities post the de-merger, in which case I can pick and choose which business/es I want to invest in. However, I am not sure by how much the price of these businesses (post they get listed) would already have run up by the time I get my hands on it.
I am going with the first option. Given the scenario, I think my margin of safety is the holding company discount which is pretty steep as per my calculations. I think the sum-of-parts will turn out to be much better than if I pick up which business/es I want to invest in.
Here I go!
Current Market Price: Rs. 600