Value Kavindra Group, which owns a cement business, a chemicals business and a 40% stake in a listed company, on a sum of the parts, and explain the holding discount.

About Rs 524 a share. Cement at 9x EBITDA of Rs 900 crore is Rs 8,100 crore, chemicals at 12x Rs 400 crore is Rs 4,800 crore, and the Rs 4,000 crore stake is taken at Rs 3,200 crore after a 20% holding discount. The parts sum to Rs 16,100 crore; less Rs 3,000 crore of net debt leaves Rs 13,100 crore across 25 crore shares. Each 10 points of holding discount moves value by Rs 16 a share.

A family that owns a grocery shop, a pharmacy and a share in a neighbour's hotel would not price the lot by multiplying total profit by one number. The pharmacy deserves more than the grocery, and the hotel share has a price of its own. A sum of the partsA valuation that prices each business or holding on its own basis and adds them, instead of applying one multiple to the whole group. gives each business the multiple its own peers command, and takes a listed holding at the price the market already puts on it. Cement is capital heavy and cyclical, so 9x; specialty chemicals grows faster on less capital, so 12x.

The stake's Rs 4,000 crore is what the shares would fetch if they could be sold at the screen price, but Kavindra's shareholders cannot sell them. A holding discount reflects that the value is locked inside a company that may never release it: selling would trigger tax on the gain, a 40% block would move the price, and the cash could be spent on something worse. Say the reason, not just the number, because the discount should shrink if Kavindra commits to distributing the stake or selling it and returning the cash.

Every 10 points of discount on a Rs 4,000 crore stake is Rs 400 crore, or Rs 16 a share. With no discount the value is Rs 556; at 40% it is Rs 492; the base case sits between. The method error is far bigger. A single 9x multiple on Rs 1,300 crore of EBITDA gives Rs 348 a share, because it undervalues chemicals and leaves out the stake altogether, which earns no EBITDA inside Kavindra's operating lines.

Close with what would change the discount, because that is the lever an analyst can research. A demerger, a stated policy to monetise the stake, or a record of buying back shares with holding proceeds would all argue for less. A history of using the stake as collateral for group borrowing would argue for more. The parts are arithmetic; the discount is the judgement.