Long term investors may consider L&T Finance IPO:SMC

MUMBAI: SMC has advised investors with long term perspective to consider the initial public offering of L&T Finance.

The company, a financial holding company, offers a diverse range of financial products and services across the corporate, retail and infrastructure finance sectors, as well as mutual fund products and investment management services, through its direct and indirect wholly-owned subsidiaries.

“Considering the P/E valuation on the upper end of the price band of Rs 59, the stock is priced at pre issue P/E of 22.20x on its annualised FY11 EPS of Rs 2.66. Post issue, the stock discounts its FY11 annualised earnings per share of Rs 2.33 by 25.37x.

On the lower end of the price band of Rs 51, the stock is priced at pre issue P/E of 19.19x on its annualised FY11 EPS of Rs 2.66. Post issue, the stock discounts its FY11 annualised earnings per share of Rs 2.33 by 21.93x,” the report said.

Promoted by Larsen & Toubro, it plans to raise funds between Rs 1245 – 1076 crore by issuing shares in the price band of Rs 51- 59 per share. The issue opens Wednesday.

It plans to use the proceeds for repayment of inter-corporate deposit issued by promoter to the company, infusion of capital in L&T Finance, infusion of capital in L&T Infrastructure Finance.

“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 priced at a premium to other listed peers. Long term investors may consider the issue,” the report said.

CARE has assigned a ‘Grade 5’ to the L&T Finance Holdings IPO which indicates ‘Strong Fundamentals’.