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UBS Investment Research
L & T
News reports suggest Finance sub IPO in
next six weeks
„ Event: media report suggests IPO of Finance sub likely in next six weeks
According to media reports, L&T could launch the Rs17.5bn IPO of L&T Finance
Holdings, within the next six weeks and that there could be pre-IPO placements of
Rs4bn for less than 5% stake. L&T Finance and L&T Infra Finance had a
combined net-worth of ~Rs30bn at end-FY11 and combined FY11 PAT was
~Rs4.3bn (3-yr CAGR of 39%). The outstanding loan book of the company as at
Sep-10 was Rs136bn. The company also has 1) an investment management
business and 2) ~5% stakes in Federal and City Union Banks (mkt value ~Rs4.5bn)
„ Impact: Enables finance business to fund growth, some valuation upsides
The capital raising would enable the Finance sub (present across infrastructure,
corporate and retail finance) to fund its growth (loan book CAGR of 30%+ over
FY08-10). 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: reiterate Buy rating, Top pick in Indian infrastructure space
We value L&T Finance and L&T Infrastructure Finance at ~Rs65bn (~5% of our
SOTP), and there could be marginal valuation upsides (implied value per media
reports is at least Rs80bn+). We expect news-flow momentum to remain positive.
We like L&T for good execution, diverse exposure and strong competitive edge.
„ Valuation: SOTP-based PT of Rs2,100, trading at lower end of band
L&T is currently trading at lower than the average of its historical range.
Q L & T
Larsen and Toubro (L&T) is India's largest engineering and construction (E&C)
company, and is the only dedicated engineering procurement and contracts
(EPC) company in India. It also has interests in electrical goods such as
switchgears and control panels. L&T has several subsidiaries engaged in various
businesses such as IT services, financing of industrial equipment, collection of
toll from roads constructed under the BOT scheme, and power generation. It has
also diversified into shipbuilding and power plant equipment businesses.
Q Statement of Risk
We believe the main risks to our price target and estimates are: 1) a change in
order inflow estimates, 2) execution issues.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
L & T
News reports suggest Finance sub IPO in
next six weeks
„ Event: media report suggests IPO of Finance sub likely in next six weeks
According to media reports, L&T could launch the Rs17.5bn IPO of L&T Finance
Holdings, within the next six weeks and that there could be pre-IPO placements of
Rs4bn for less than 5% stake. L&T Finance and L&T Infra Finance had a
combined net-worth of ~Rs30bn at end-FY11 and combined FY11 PAT was
~Rs4.3bn (3-yr CAGR of 39%). The outstanding loan book of the company as at
Sep-10 was Rs136bn. The company also has 1) an investment management
business and 2) ~5% stakes in Federal and City Union Banks (mkt value ~Rs4.5bn)
„ Impact: Enables finance business to fund growth, some valuation upsides
The capital raising would enable the Finance sub (present across infrastructure,
corporate and retail finance) to fund its growth (loan book CAGR of 30%+ over
FY08-10). 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: reiterate Buy rating, Top pick in Indian infrastructure space
We value L&T Finance and L&T Infrastructure Finance at ~Rs65bn (~5% of our
SOTP), and there could be marginal valuation upsides (implied value per media
reports is at least Rs80bn+). We expect news-flow momentum to remain positive.
We like L&T for good execution, diverse exposure and strong competitive edge.
„ Valuation: SOTP-based PT of Rs2,100, trading at lower end of band
L&T is currently trading at lower than the average of its historical range.
Q L & T
Larsen and Toubro (L&T) is India's largest engineering and construction (E&C)
company, and is the only dedicated engineering procurement and contracts
(EPC) company in India. It also has interests in electrical goods such as
switchgears and control panels. L&T has several subsidiaries engaged in various
businesses such as IT services, financing of industrial equipment, collection of
toll from roads constructed under the BOT scheme, and power generation. It has
also diversified into shipbuilding and power plant equipment businesses.
Q Statement of Risk
We believe the main risks to our price target and estimates are: 1) a change in
order inflow estimates, 2) execution issues.
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