2025-08-13

When NAV Beats DCF  Valuing a Real Estate Holding Company

When NAV Beats DCF  Valuing a Real Estate Holding Company

Not all businesses are built for discounted cash flow.
Some speak more through tangible assets than projected earnings  especially in real estate-heavy entities.

Let’s decode a case where Net Asset Value (NAV) gave a truer picture than DCF.

 

 The Scenario:

  •  Company owns 3 commercial buildings + 2 land parcels
  •  Minimal rental income (~?30L/year)
  •  High depreciation, low EBITDA
  •  No expansion plans or new revenue lines
  •  Looking to value for internal restructuring and buyback

 

 Approach 1: DCF Method

  • Based on ?30L rental income with 3% growth
  • CapEx, inflation, and discounting adjusted
  • ?? DCF value came to ~?3.2 Cr
  • Result: Severely undervalued, did not reflect asset strength

 

 Approach 2: NAV Method

  • FMV of real estate: ?10.5 Cr (as per registered valuer)
  • Liabilities: ?1.2 Cr
  •  NAV = ?10.5 Cr – ?1.2 Cr = ?9.3 Cr
  •  Matched market price expectations + board sentime

 Key Learning:

  • DCF ignored unrealized potential in appreciating land
  • Income was low, but asset base was high and valuable
  • NAV gave a fairer view for regulatory & internal decisions

 

 Final Thought:

“When value lies in the balance sheet, not the P&L  NAV should lead.”

 

Next Up: Valuation Disputes  When Two Reports Tell Two Different Stories#Va

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