What is Investment Holding Companies (IHCs)?

About Investment Holding Companies (IHCs):

• IHCs, commonly referred to as Holdcos, are entities which hold assets and securities of other listed companies, most commonly of their own group firms.
• IHCs own a controlling interest in one or more companies but don't provide other services (such as the production of goods or services) or engage in business directly.
• It only serves as an ownership vehicle of other companies or investments.
• Its primary purpose is to hold and manage investments in one or more subsidiary companies.
• The holding company may or may not provide direct operational support to the companies it owns.
• IHCs come in several forms, including private equity firms and publicly traded corporations.
• An IHC may provide a vehicle for multiple investors to pool their funds and collectively invest around a specific investment objective or strategy, e.g., real estate.
• They may be built around an industry vertical or broadly diversified across multiple industries.
• But they all have the same focus: to maximize investor returns through asset management and capital allocation.
• Holding companies often look for businesses with growth potential or companies in need of restructuring or operational improvements.

They provide strategic guidance, financial resources, and connections to help grow ‌businesses (i.e., their investments).

Q1: What is equity security?

An equity security is a financial instrument that represents an ownership share in a corporation. The instrument also gives its holder the right to a proportion of the earnings of the issuing organization. The typical equity security is common stock, which also gives its owner the right to a share of the residual value of the issuing entity, in the event of a liquidation.

Source: Market regulator Sebi's price discovery framework puts shade on holdcos