Sum-of-the-Parts Valuation

SOTP is the right approach for a conglomerate, where a single multiple applied to consolidated earnings averages away the difference between a fast-growing division and a declining one. It requires segment disclosure good enough to value each part, which is exactly what many conglomerates do not provide. A holding company discount is customary because minority shareholders cannot access the individual businesses and the structure adds costs and tax friction; discounts of 20% to 50% are common in India. The method's weakness is that it produces a value that only crystallises if the parts are actually separated, and management may never do so.