What are holding companies? And should you invest in them?

Did you know there are businesses with no businesses? You heard it right. There are companies that do not offer any goods or services or have any operations of their own. How do they make money, then? Why do they even exist? Their name explains it - holding companies - meaning they exist to hold stakes or invest in other companies and assets. The money part? They primarily earn income from dividends and interest on investments. Tata Investment Corporation, Bajaj Holdings, JSW Holdings, Maharashtra Scooter, and Kama Holdings are some publicly listed holding companies with no operations of their own. Their only business is having stakes and investments elsewhere. So, you have a business that has no operations, no direct earnings, and no concrete outlook. Why should anyone invest in them? The answer lies in their valuations. Holding companies offer a unique value proposition, drawing in the seekers of value. Value investors' favourites Holding companies generally trade at steep discounts to their portfolio's value.

This article was originally published on May 30, 2024.