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• SOTP is regarded as the best tool to value companies with diversified business interests

• It evaluates each business or division of the company separately and assigns a value to its contribution

• This valuation also captures future potential of the new ventures which are not generating revenues right now

• At the end, the value of all the parts (including core business) are added up to arrive at an approximate value of the company as a whole

• SOTP valuation indicates if the company’s value would be increased if it was split into separate business units

SOTP valuation of Bajaj Auto
by Indiainfoline on 13 July 2007

Bajaj Auto (vehicle manufacturing) Rs 933
+
Bajaj Auto Finserv Rs 450
+
Bajaj Holdings and Investment Rs 1,037
=
SOTP Rs 2,420 value > Rs 2,195 Stock price on 13 July 2007

Figures show what different businesses of Bajaj Auto would have contributed to its valuation