L&T Finance Holdings Ltd, which is coming out with an initial public offering (IPO), is a financial holding company offering a diverse range of financial products and services across sectors, as well as mutual fund products and investment management services through its direct and indirect wholly owned subsidiaries. The company is promoted by Larsen and Toubro Ltd (L&T).
L&T Finance has a highly diversified business model covering a variety of high growth business segments across its core business groups, including infrastructure finance, construction equipment finance, transportation equipment finance, rural products finance, microfinance, corporate loans and leases, supply chain finance, capital markets finance, the distribution of financial products and investment management products and services.
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The company has established its presence in 23 states. As on 31 May, it had 837 points of presence across India.
The workforce has increased more than three times in order to support this physical and geographic growth, up from a headcount of 1,214 in March 2008 to 4,395 as on 31 May.
For each of its businesses, it has established a strong credit check and asset valuation framework to evaluate and monitor credit risk at the time of origination. The company does not typically buy loan portfolios, but rather focuses on originating and retaining its own loan portfolio with the objective of maintaining asset quality to the highest standards.
The company currently has four business groups offering a broad spectrum of financial products and services. It intends to explore opportunities to expand its operations by developing new products and services within its existing lines of business as well as selectively identifying opportunities to expand into new lines of business, as it has done in investment management (in January 2010), microfinance (in June 2008), financial products distribution (in September 2007) and infrastructure finance (in January 2007).
Considering the price-earnings (P-E) valuation on the upper end of the price band of Rs 59, the stock is priced at pre-issue P-E of 22.20 times on its annualized FY11 earnings per share of Rs 2.66.
The company has a strong balance sheet and a well established infrastructure finance business. The company’s financial product distribution business is also growing at a rapid pace. The strong promoter background also helps in raising funds at competitive rates.
The issue price is at a premium to other listed peers.
Edited excerpts from a report by SMC. Send your comments at firstname.lastname@example.org