Thursday, July 21, 2011

L&T Finance IPO

L&T Finance Holdings, L&T Group's financial services subsidiary has come out with an IPO to mobilise up to Rs 1,245 crore from the primary markets by diluting up to 17% of its stake. The total issue size is of Rs 1,575 crore, but the net issue size to the public will be only Rs 1075 crore, as the company has already raised Rs 330 crore through a pre-IPO placement to Capital International which has picked up a four percent stake in the company at Rs 55 per share through this. Apart from that, the company has also reserved some portion of the issue to the L&T Group employees as also to the existing L&T shareholders, both of whom will get a Rs 2 discount to the issue price.

The five subsidiaries of L&T Finance Holdings, which is a fully-owned subsidiary of the engineering major L&T, are L&T Infrastructure Company, L&T Finance, India Infrastructure Developers, L&T Investment Management and L&T Mutual Fund Trustees. The last two are the subsidiaries of L&T Finance. This is the first public issue from the house of L&T since the parent's listing way back in 1950.

The IPO shall open on July 27 and shall close on July 29, 2011. The company is going to raise Rs 161 crore via anchor investors in the IPO, which should be one day before issue opens on July 26. The company has fixed the price band of the IPO at Rs 51 to Rs 59 per share.

The combined asset base of these group companies as of FY 11 stood at Rs 18,800 crore, up from Rs 1,2000 in FY10. The company had a Profit After Tax of Rs 392 crore last fiscal, up from 262 crore in the previous fiscal.

The proceeds of the IPO are proposed to be used for augmenting the capital base of L&T Finance and L&T Infra to meet the capital requirements arising out of expected growth in their assets, primarily the loan portfolio.

JM Financial Consultants Private Limited, Citigroup Global Markets India Private Limited and HSBC Securities and Capital Markets (India) Private Limited joint global co-ordinators as well as book running lead managers to the issue. Barclays Securities (India) Private Limited, Credit Suisse Securities (India) Private Limited and Equirus Capital Private Limited are also the book running lead manager to the issue.

Recommendation:
We would recommend L&T Finance IPO to investors. The company operates in a high growth markets and is reasonably priced compared to its peers. CARE and ICRA has also assigned Grade 5 to the IPO indicating strong fundamentals.

Subscription:
L&T Finance IPO has received good response from investors and has managed to get 5.34 times subscribed.

At the close of the IPO,
QII segment got subscribed by 1.93 times
NII segment got subscribed by 6.18 times
Retail segment got subscribed by 9.61 times
Employees segment got subscribed by 1.53 times
Shareholders segment got subscribed by 3.35 times

Allotment:
L&T Finance has fixed the price of the issue at Rs 52 per share. Click here to check L&T Finance IPO Allotment status!

Listing:
L&T Finance IPO listed on 12th August, 2011. The IPO closed at Rs 49.95 on the NSE, down 4% compared to the issue price of Rs 52. The stock opened at Rs 53.85, which was an intra-day high as well and had a intra day low of Rs 49.30.