At 70% discount, is this holding company stock a bargain?

Summary: It’s rare to find a holding company trading at just 0.3x book value and this one even owns a stake in a well-known consumer brand. On paper, it has all the makings of a rare deep-value find. Let’s find out if it really is one.

A holding company trading at a staggering 70 per cent discount to its book value is bound to turn heads, especially of bargain hunters. Add to that zero debt and solid equity reserves worth Rs 2,400 crore and the stock in question, VLS Finance, starts looking like a dreamy value bet. But before you rush to the counter, it’s worth considering if the steep discount might actually be justified.

A closer look at this seemingly appealing small cap, with a P/B ratio as low as 0.3 times, shows why the market may be perfectly reasonable in keeping its distance.

Opaque investments: A black box

VLS Finance, which once pursued nearly every financial service imaginable including leasing, stock broking, merchant banking, investment advisory, offshore funds, never actually built a focused, scalable core. Today, its primary business is simply holding investments.

The biggest problem? No one really knows what’s inside VLS Finance’s investment portfolio.

The only known holding is a roughly 9 per cent stake in Relaxo Footwear, worth around Rs 1,000 crore (as per a back-of-the-envelope calculation)— significant, yes, but still a fraction of the reported Rs 3,000 crore portfolio. The rest? Undisclosed.

This opacity is more than an irritant. Without knowing which companies, bonds or funds make up the bulk of the portfolio, and how liquid or risky they are, investors cannot reliably value the business.

Poor disclosures, weaker trust

VLS’s financial communication is bare-bones. No earnings calls. No detailed presentations. Annual reports with generic commentary.

Such minimal transparency raises governance red flags and undermines market confidence. A history of strategic flip-flops, from leasing to broking to merchant banking to investments, and a collapse in its market price from Rs 855 in the 1990s to Rs 2 in 2003 has left a lasting trust deficit.

Erratic earnings, unreliable value

Its fortunes, being tied to the performance of its investment portfolio, are sharply vulnerable to market swings. The earnings history underscores this: a loss in FY19; Rs 39 crore profit in FY20; a spike to Rs 324 crore in FY24; and a collapse to Rs 46 crore in FY25. Last five years’ average ROE? Just 7 per cent. Operating revenue in FY25 was barely Rs 100 crore, mostly from trading gains. Its broking arm, VLS Securities, and new real estate venture remain too small to matter.

The Relaxo overhang

While Relaxo is a market leader in value footwear, it is battling stagnant performance and market share loss with its share price on a swift decline. For VLS, such heavy dependence on a single asset makes it more a Relaxo proxy than a diversified investment vehicle.

Why the discount might be fair

When the market cannot see what you own, cannot trust how you disclose and cannot rely on your earnings, a steep discount to book value is not a market oversight. It’s the market pricing in risk.

VLS’ 0.3x P/B certainly makes it look like a bargain. However, even this P/B could be expensive if the unknown assets are worth far less than reported. Whether the stock is a true bargain or a value trap, it’s hard to tell. 

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