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Wednesday, July 27, 2011

L & T Finance Holdings : Subscribe for LONG TERM !!!

Price Band - Rs. 51- Rs. 59, Face Value- Rs.10.
Discount - 2% to L&T Employees & Shareholders.
Minimum Lot Size –  100 Shares.
Issue opens on - 27th July 2011, Wednesday.
Issue closes on – 29th July 2011, Friday.
Listing on – 12th August 2011.
Total No. of Shares offered – 21.1 Cr shares if priced at Rs.59
Total No. of Shares offered – 24.4 Cr shares if priced at Rs.51
Total Size of the Issue - Rs. 1,245.00 Crs.
IPO GRADING – 5/5 - CRISIL, 5/5 - ICRA – Strong Fundamentals
FAIR VALUE - Rs. 65 - Rs. 70.

KEY FINANCIALS (Consolidated)FY 2010FY 2011
Net Interest Income (Rs. in Cr) 726.001,039
Net Profit (Rs. in Cr) 242.00 398.00
Net Interest Margin % 7.807.10
EPS (Rs.)1.802.80
Price to Book Value (x)3.602.60
Return on Asset % 2.502.50
Return on Equity % 21.1016.30

L&T Finance Holdings Limited was incorporated in 2008 and is a holding company for many of the L&T group companies. It has mainly 2 fully owned non-banking finance companies (NBFCs) – L&T Infrastructure Finance ( which contributes 33 % of its revenues) and L&T Finance (which contributes 66 % of its revenues).  Apart, from these L&TFH owns close to a 5 % stake in Federal Bank and City Union Bank. It also owns L&T Mutual Fund which has an asset base of Rs. 5,200 Cr as of June 2011. The company has a presence in 23 states, with 837 points-of-presence across India. The company’s operations are primarily into 4 business groups namely the Infrastructure Finance Group, the Retail Finance Group, the Corporate Finance Group and the Investment Management Group.  Company intends to use the IPO proceeds for the repayment of intercorporate deposit issued by the parent company L&T about Rs. 345 Crs; infusion of capital in L&T Finance for about Rs. 515 Cr and L&T Infrastructure Finance Company for about Rs. 485 Cr. There is a reservation for employees for Rs. 50 Cr and an additional reservation of Rs. 120 Cr for L&T shareholders, both of would get an Rs. 2.00 discount to the issue price. Out of the total of Rs. 537.5 Cr has been reserved for qualified institutional buyers (QIBs), Rs. 161.25 Cr for non-institutional investors (HNIs) and Rs 376.25 Cr for retail investors. The company had done a pre – IPO placement at Rs. 55/sh and anchor book to have a subscription of Rs. 56/sh, a nearly Rs. 153 cr are committed by anchor investor.
The company got the Infrastructure Financing Status in July 2010 it will benefit to raise more funds, of longer tenors and at lower costs, and in turn to lend more to infrastructure companies. The company's current net worth is around Rs 2,900 crore & post issue net worth including a 30% growth for FY12 would come be around Rs 4,700 crore. The company could be a contender for the banking license with RBI in the process of finalizing guidelines for issue of new banking license; it is believed that L&T group through L&TFH could bid for receiving license. RBI is believed to give banking license to those corporate houses which have market capitalization of more than Rs. 10,000 Cr. L&T comes winner as its promoter stake is less than 25 % and is driven by strong professional management.

Comparisons with Industry as on 31st March 2011
KEY FINANCIALS FV (Rs.) EPS (Rs.) P/E (x) RoNW % BV/ Sh (Rs.)
L & T Finance HLDG 10.00 2.87 --- 13.58 20.40
Shriram Transport Fin.10.0053.9212.1024.84216.37
M&M Financial Ser10.0050.9212.3019.36244.70
IDFC10.008.7715.4011.3976.97
REC10.0026.187.6020.15129.90
Pow.Fin.Corp10.0023.068.3017.37132.79
Sundaram Finance10.0070.017.70 21.53325.22

According to me the fair value of L&T Finance Holdings Ltd comes to Rs. 65.00 - Rs. 70.00. Off - course it will trade into discount but for long term investors that will be a good opportunity, buy at if it trades below Rs. 55.00.   
SUBSCRIBE FOR LONG TERM & IF FOR TRADING PROSPECTIVE GO FOR IT ON LISTING GAINS......

3 comments :

  1. HI BHAVIKK
    I think your analysis on L&T may go right ...
    I hope it touches Rs.65 on listing....
    L & T Finance IPO received subscriptions for more than 5 times its size, aggregating to a demand in excess of Rs 5800 crore. The company announced the issue price of Rs 52 per equity share as against the price band of Rs 51 to Rs 59 per equity share.

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