Recently I read a recommendation to buy stocks of VLS Finance on Moneycontrol by some stock broker. He has discussed VLS Finance as a value stock to buy with good amount of intrinsic value. Let's find out if it is a stock to buy, if yes, at what stock price.
VLS Finance Ltd. is a non banking finance company (NBFC). The Company deals/hedges/arbitrages the securities in the capital market and futures, and options securities in the derivative segment. The Company’s subsidiaries include VLS Securities Ltd., VLS Investments Ltd., VLS Asset Management Ltd. and VLS Investment Inc.
VLS Finance's present business:
* Investment and Merchant Banking activities in 100% subsidiary – VLS Securities Ltd. Registered as a Category I Merchant Banker with the Securities & Exchange Board of India (SEBI)
* Proprietary Investments and Equity Research
* Corporate Consulting & Advisory Services
* Privatization & Infrastructure Finance
* Stock Broking in 100% subsidiary – VLS Securities Ltd. Membership to the National Stock Exchange of India Ltd. (NSE)
The stock broker discussed about disputed investment of VLS Finance in Delhi metropolitan hotels. It's rough valuations are around Rs. 800 crores. VLS Finance would be holding 87% of this valuation IF court judgment favors VLS Finance.
VLS Finance and it's subsidiary holds 14% stocks in Relaxo footware. This stake comes around Rs. 60 crores.
I looked at the financial details of VLS Finance. You may check it here. Company's financial performance is not consistent at all. Variations are big in quarterly numbers. EPS for FY10 was 1.21. For FY 11, if we try to predict it based on June quarters, it would be again around 1 so nothing great in terms of earnings. The facts depending on which stock broker has recommended are: Investment of approx. 60 crores in Relaxo. Current market capital of VLS Finance is Rs. 90 crores. Book value is Rs. 48.41 .
At current stock price of 23, stock is available at good discount to it's book value. And disputed investment of VLS Finance in Delhi metropolitan hotel valued at Rs. roughly 600 crores. These facts make VLS finance a stock to buy. Total valuations for VLS could be 600+60+90 i.e. Rs. 750 crores against current market capital of Rs. 90 crores. If the disputed court case judgment favors VLS Finance, it could be valued at market cap of at least Rs. 400 crores. This leaves room for stock price to grow 4 - 5 times and makes VLS finance a stock to buy.
Not to forget though, this depends on disputed investment case which is pending in court for judgment. If stock corrects below Rs. 20 levels, one my buy stocks for long term in small quantity.