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Industrial And Prudential Investment Company (IPI)


IPI is an investment company holding securities with market value of about 307cr as at 31st March, 2011.  It has increased dividend payouts commensurate with increases it receives but the overall payout is low.  Its investments appear to be largely of a long-term nature (over 90% of total) with incremental additions being added to liquid mutual funds.

Being an investment company, the balance sheet is better indicative of value as income statement performance is simply derived from investments and incomplete (as full share of investees’ earnings are not reported) and hence, performance numbers are largely irrelevant to a fundamental assessment of the company.

The primary risk pertaining to the company is impairment in the intrinsic value of securities and fund units it holds as reflected in diminished market prices and net asset values (NAVs) over the long run. 

Moreover, the dividend payout is abysmally low with less than 1% of liquid assets paid out last year raising significant questions about management’s faithfulness towards minority shareholders.  The money ought to be returned to shareholders in far larger proportions since management don’t have profitable reinvestment opportunities and the shareholders can deploy the funds in listed securities and mutual funds themselves - they don’t need management to do it for them. 

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