InvestorQ : Why are analysts saying that SBI looks attractive on SOTP basis? What exactly does this SOTP basis mean?
Neelam Naik made post

Why are analysts saying that SBI looks attractive on SOTP basis? What exactly does this SOTP basis mean?

Answer
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Priyanka N answered.
7 months ago


SOTP means (sum of total parts). At times a company as a whole may appear to have a lot of problems but if you break up into different businesses and subsidiaries then the stock should be a lot better priced. For example, SBI substantially owns SBI life with a market cap of Rs.90,000 crore, substantially owns SBI Cards with a market cap of Rs.70,000 crore and full owns SBI MF with an approximate indicative market cap of Rs.75,000 crore. If you add these big group companies together it comes to around Rs.2,35,000 crore. If you add up the other smaller businesses, then the valuation of these subsidiaries would be closer to Rs.2,70,000 crore. But the whole of SBI is trading at around Rs.3,00,000 crore, which means that you are getting the entire banking business at just Rs.30,000 crore. That is why it is said that the sum of total parts is more than whole. That is SOTP valuation.