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L&T Finance Holding – Subscribe
Diversified loan mix
L&T Finance Holding’s (L&TFH) well-diversified loan book, ranging from small ticket
microfinance to big ticket infra loans, provides the company an opportunity to tap into
various under-penetrated segments and address a broader range of growth opportunities
across cycles. In terms of reach, L&T Finance Group has pan-India presence (23 states,
837 points of presence). Also, compared to specialised lending NBFCs, L&TFH’s risk is
much better spread across the various segments it operates in, which reduces the risks
associated with any particular segment or customer concentration.
Strong growth track record
L&TFH’s loan portfolio has grown at a 56.6% CAGR over FY2009–11, way ahead of its
peers (35.2% for IDFC, 14.5% for Shriram transport). The company has its sights set on
two of the most rapid growing sectors – infrastructure and rural development, which gives
high visibility to its loan growth outlook, driven by higher government spending and
substantial latent demand. Net profit of the holding company has grown by 53.4% over
FY2010–11, although on a low base.
Strong parentage, but relatively expensive at the upper band
L&TFH looks well positioned for growth, considering its bolstered capital position post-IPO,
diversified loan segments and healthy track record. The diversified loan book also reduces
risk emanating from sectoral or customer concentration. That said, it remains to be seen if
the company can match the ability of niche NBFCs in profitably sourcing high-yielding
loans, while managing credit risk effectively. At present, based on FY2011 numbers, the
company’s RoEs were on the lower side compared to peers. Also, there are near-term
macro headwinds for NBFCs from higher interest rates, slowing credit demand and assetquality
concerns, due to which valuations of listed NBFCs have corrected. In context of its
lower RoEs relative to peers and considering the near-term macro headwinds, valuations at
the upper band look a little expensive in our view at ~2.2x post-IPO net worth (~2.0x at
the lower band). Hence, we recommend Subscribe at the lower end of the price band.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
L&T Finance Holding – Subscribe
Diversified loan mix
L&T Finance Holding’s (L&TFH) well-diversified loan book, ranging from small ticket
microfinance to big ticket infra loans, provides the company an opportunity to tap into
various under-penetrated segments and address a broader range of growth opportunities
across cycles. In terms of reach, L&T Finance Group has pan-India presence (23 states,
837 points of presence). Also, compared to specialised lending NBFCs, L&TFH’s risk is
much better spread across the various segments it operates in, which reduces the risks
associated with any particular segment or customer concentration.
Strong growth track record
L&TFH’s loan portfolio has grown at a 56.6% CAGR over FY2009–11, way ahead of its
peers (35.2% for IDFC, 14.5% for Shriram transport). The company has its sights set on
two of the most rapid growing sectors – infrastructure and rural development, which gives
high visibility to its loan growth outlook, driven by higher government spending and
substantial latent demand. Net profit of the holding company has grown by 53.4% over
FY2010–11, although on a low base.
Strong parentage, but relatively expensive at the upper band
L&TFH looks well positioned for growth, considering its bolstered capital position post-IPO,
diversified loan segments and healthy track record. The diversified loan book also reduces
risk emanating from sectoral or customer concentration. That said, it remains to be seen if
the company can match the ability of niche NBFCs in profitably sourcing high-yielding
loans, while managing credit risk effectively. At present, based on FY2011 numbers, the
company’s RoEs were on the lower side compared to peers. Also, there are near-term
macro headwinds for NBFCs from higher interest rates, slowing credit demand and assetquality
concerns, due to which valuations of listed NBFCs have corrected. In context of its
lower RoEs relative to peers and considering the near-term macro headwinds, valuations at
the upper band look a little expensive in our view at ~2.2x post-IPO net worth (~2.0x at
the lower band). Hence, we recommend Subscribe at the lower end of the price band.
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