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LTFHL completes pre-IPO placement; Maintain Buy on L&T
News
L&T Finance Holdings (wholly owned by Larsen & Toubro) has raised Rs3.3
bn (US$ 74.4 mn) from a pre-IPO placement at Rs 55 per share to Capital
International PE fund. The Company intends to launch its IPO later in the
month. The company expects to raise close to Rs 17.5 bn (US$390 mn)
through the IPO which would be used for repayment of ICD and
strengthening the capital base of the finance business.
Analysis
We currently value L&T Finance Holdings in our SOTP at 1.5XFY12E P/B for
the retail and infrastructure finance business and asset management
business at 5% of AUM. We add the market value of the investment
portfolio to arrive at a valuation of Rs 67 bn (US$ 1.49 bn) (pre-money). In
our value for LTFHL above, we do not incorporate the impact of the
company obtaining a banking license, given limited visibility on eligibility
criteria and the timeline.
Based on the pre-IPO placement price of Rs 55 per share, L&T
management estimates the pre money valuation for the company would be
close to Rs 80 bn (US$ 1.78 bn) which is at a 20% premium to our current
valuation. If the IPO goes through at the valuation at which the pre-IPO
placement has been completed, we estimate there could be potential
upside of Rs 23 (1%) to our current SOTP.
Implications
We make no change to our TP and retain our Buy rating on the stock.
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