L&T Finance Holdings IPO (Initial Public Offering) : Analysis

by khalid on 25/07/2011 · 0 comments

L&T Finance Holdings, a subsidiary of engineering giant Larsen & Toubro is entering into primary market with an Initial Public Offering (IPO) of — Equity Shares of Rs 10 each. The IPO is opening on 27th July 2011 and will close on 29th July 2011. The premium of the issue will be decided through a 100% Book Building Process. The price band for the issue has been fixed at Rs 51 to Rs 59. The company is likely to raise around Rs 1245 Crore through the issue. The issue consists of Rs 50 crore worth of equity shares reserved for employees and Rs 125 crore for L&T shareholders. L&T Finance Holdings is a financial holding company offering a diverse range of financial products and services across the corporate, retail and infrastructure finance sectors, as well as mutual fund products and investment management services.

The proceeds of the IPO are proposed to be utilized for repayment of intercorporate deposit issued by promoter to company (worth Rs 345 crore); and augmenting the capital base of L&T Finance (by infusing Rs 570 crore) and L&T Infra (by investing Rs 535 crore), to meet the capital adequacy requirements to support the future growth in their business.

L&T Finance Holdings is a fully-owned subsidiary of engineering giant L&T. L&T Finance Holdings owns five subsidiaries namely L&T Infrastructure Company, L&T Finance, India Infrastructure Developers, L&T Investment Management and L&T Mutual Fund Trustees.

Combined assets of these group companies as of FY11 are at Rs.18,800 crore. It was up from Rs.12,000 crores in FY10. The company had a PAT of Rs.392 crores last fiscal, it had grown from Rs.262 crores in the previous fiscal.

L&T Finance Holdings has raised Rs.330 crores through a pre-IPO placement in July 2011. It sold a 4% stake to Capital International Group at Rs.55 per share.

This IPO price band puts the price to book value ratio between 1.7 – 1.9, this is comparable to similar NBFC peers like M&M Finance (2.1 – 2.3 P/BV) IDFC (1.7-1.8 P/BV).

This IPO price does not looks very high when looked at from long term perspectives. The stock should give good returns in coming 3-4 years. Listing gains may not be very high. Cautious investors may look at the listing of IPO and then decide when to buy stocks of this holding company from engineering giant.

Stay tuned to BelltheBull Blog for more on L&T Finance Holdings IPO !

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