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UBS Investment Research
L & T
F inance sub Pre-IPO raises Rs3.3bn
Event: Finance sub raises Rs3.3bn via pre-IPO placement of 60m shares
The pre-IPO private placement was at a price of Rs55 per share with Capital
International. The two main entities of the finance sub, L&T Finance and L&T
Infra Finance had a combined net-worth of ~Rs30bn at end-FY11, combined FY11
PAT was ~Rs4.3bn (3-yr CAGR of 39%) and combined Sep-10 loan book stood at
Rs109.5bn (CAGR of 30%+ over FY08-10). Please refer our note "News reports
suggest Finance sub IPO in next six weeks" dated 28th-June-2011 for details.
Impact: provides benchmark valuations
The pre-IPO placement provides some benchmark valuations and the IPO could be
launched soon. The deal implies a pre-money valuation of ~Rs78bn. The company
plans to raise Rs17.5bn that would imply a post-money valuation of ~Rs95bn
(though the final IPO price could be different). The capital raising would enable
the Finance sub to fund its growth. It would also free-up the parent entity to invest
capital in other growth ventures (L&T invested ~Rs7bn in Finance subs in FY11).
Action: retain Buy rating, Top pick in Indian infrastructure space
We value the Finance subs at ~Rs65bn (~5% of our SOTP) implying marginal
valuation upsides. We like L&T for good execution, diverse exposure and strong
competitive edge.
Valuation: SOTP-based PT of Rs2,100
L&T is currently trading at lower than the average of its historical range.
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