Multi Baggers

McDowell Holdings

Recent news that have made headline is Mr Mallya is losing top shareholder rating in almost in all his firms and thus on verge of losing control. This gave us an idea where we feel Mcdowell Holdings could be a good switch for UB holding shareholders if they are betting on Phoenix to rise again.

A very simple mathematics suggests this could be a share worth much more than what it is quoted at.

Heineken offered Vijay Mallya group to sell stake in the company and as reported in media the deal should happen at a premium.

Now, how McDowell Holding shareholders will benefit.

Vijay Mallya and associate companies pledged shares are getting triggered in McDowell Holding and now his group co. owns appx 30% in company of this 30% almost 40% (i.e 12.99 percent of UBHL is pledged ), where as institution owns over 30% in the company. If anything happens on UBHolding winding up petition the shares will be sold for sure in McDowell Holding too which will make them owning appx 18% in the company

In last two quarters shareholding pattern suggest almost 8% of shares got sold in market and seems some interested people is slowly acquiring these shares.

When we calculated what the intention of the move could be?

We felt this is another company which may slip from his hands and small risk takers can benefit of valuation gap. ACACIA Partner through various fund owns approximately 10% in the company we assume they would not be selling their holding for meager 3.2 crore or there is another fund Route one partner which owns 8% through various funds. If any of the two take over the 12.99% pledged shares of UB-Holding they will become the largest share holder and they can sell the clean shares to interested parties thus giving them surplus to their acquisition price.

We have made certain observations which we feel one can hit a small fortune in the company or the prices would be hovering between current lines.

On holding value of 229 crores market cap is 32 crores valuing holding discount of 13 percent whereas companies are valued 30-40p of holding value. We continue to value the company at holding discount of 35p which roughly works out to be 58 a share.  We have made assumption of pledged shares as bank guarantee towards group companies will be sold off by banks to recover the dues if any relaxation happens than McDowell Holding will be owning 1 crore shares of UBL equaling appx 800 crores which will rerate the company significantly otherwise using the conservative approach of clean shares & small pledge (34 lac shares) one can make a small flip. After all risk reward 7 for 35 or 1 tick down for 5 Rs. gains. Technically one should book his cost around 40 per share and ride the rest for 58. One should not average or be aggressive on this stock as lot depends on large shareholders move, a lot of clarity will emerge with UBL shares to be bought by Heineken.

Risk high, Only for investors who are willing to take time risk and also counting on fortune for group companies to improve or own UB Holding Shares. It's a risk reward which can favor these high risk takers as downside is to the extent of 5 Rs. But if large players overtake shareholding of largest shareholder the holding value will be equivalent to cash equivalents.