L&T Finance Holding - Subscribe - GEPL Capital

Objective of the Issue

- For repayment of inter-corporate deposit issued by the Promoter (L&T) to the Company (Rs.3,450mn).
- For augmenting the capital base of L&T Finance (Rs.5,150mn ) and L&T Infra (Rs.4,850mn), to meet the capital adequacy requirements to support the future growth in their businesses and;
- For other general corporate purposes.

L&T Finance Holdings Ltd is a financial holding company offering diverse range of financial products and services across corporate, retail and infrastructure finance sectors. Promoted by L&T, Company has presence in 23 states with 837 points of presence. Company's operates into four business groups; Infrastructure Finance, Retail Finance, Corporate Finance and Investment Management Groups.

Valuation & Recommendation:

L&T Finance Holdings Ltd priced between Rs.51-59 is at significant premium at both the price bands compared to its listed peers. Company is available at a P/E multiple of 18.02x and 20.85x at its lower and upper price bands of Rs.51 and Rs.59 respectively in comparison to the P/E multiples of its listed peers (8x-16x). Also, in terms of P/BV the company is expensive (2.89x) as compared to most of its listed peers (1.57x - 3.23x). The premium is justified due to various reasons

1. Backed by L&T, one of the most well respected business houses in India
2. Strong Credit Rating from rating agencies like CARE and ICRA (IPO GRADE 5)
3. Opportunity to grow their business by raising Tier II capital
4. Quality of its loan book (Gross NPA's have come down from 2.42% in FY10 to 1.11% in FY11 and Net NPA's have also reduced by significant amount from 1.69% in FY10 to 0.67% in FY11)
5. Size of its loan book (Rs.179,432 mn) one of the largest players in the industry.

Hence, we recommend a SUBSCRIBE with a medium to long term investment perspective.

Source : Equity Bulls

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