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Building a crescendo

There are some holding companies, which are highly undervalued in the stock market.

The reasons for this can be many: low earnings visibility, insignificant operating revenue of the holding company or market inefficiency. Whatever the reason, it makes sense to include these value stocks in your portfolio.

One such stock is that of Binani Industries (BIL), the holding company of Braj Binani group. At its current market price, it’s trading at a huge discount to its net asset value and offers good upside potential to investors with an investment horizon of 2-3 years.


BIL is a holding company with two major subsidiaries – Binani Cement (BCL) and Goa Glass Fibre. BIL itself doesn’t have any operations. Recently, BCL nearly tripled its cement production capacity to 6.2 million tonnes (mt) and the full impact of the augmented capacity will be visible from FY09 onwards.Goa Glass Fibre is a relatively small company with net sale of around Rs 85 crore during FY07.

Growth Drivers

Cement: BCL is likely to be BIL’s main growth driver. BCL plans to double its global cement capacity to around 12 mt by FY10. It recently acquired a 2.2-mt cement plant in China and is in the process of taking over a grinding unit in UAE. China is the world’s largest cement market with annual production of 1,200 mt. However, nearly a third of Chinese production is accounted for by vertical kilns, which are polluting and are facing closure. BCL sees this as an opportunity, as its target company uses eco-friendly horizontal kilns.

Back home, BCL announced plans to set up a port-based 2.5-mt cement plant in Gujarat to supply clinkers to the UAE grinding unit, thus helping it tap growth opportunities in West Asia. BCL is eyeing opportunities in eastern India. If things go as planned, BCL’s revenues may cross the $1-billion mark by FY11.