MOSL: L&T FINANCE (Buy)-Well capitalized for growth~15% accretion to BVPS on account of recent capital infusion
L&T Finance: Well capitalized for growth; ~15% accretion to BVPS on account of recent capital infusion
(LTFH IN, Mkt Cap USD5.3b, CMP INR170, TP INR240, 41% Upside, Buy)
- L&T Finance (LTFH) recently raised equity capital amounting to INR30b, of which INR20b came from the parent (L&T). As a result, leverage has declined from previous elevated levels of ~8.5x to ~6.1x now. We believe LTFH is now well capitalized for growth, and will not need to raise equity capital at least in the next 3-4 years.
- Over the past two years, there has been a modest increase in the share of retail loans from 26% to 30%. On the wholesale lending front, there has been a mix shift toward real estate finance (its share has increased from 6% to 12% over the same period), while the contribution of other wholesale finance segments (infra, structured finance, etc.) has declined. However, the increased share of real estate finance is likely to translate into strong growth in the retail home loan segment in the coming years, in our view.
- The non-fund-based businesses are on a strong growth trajectory. Over the past two years, AAUM in the investment management business has grown at 60%+ CAGR, with equity AAUM growing at 80%+ CAGR. Profitability, too, has improved significantly, with PAT growing from INR190m in FY16 to INR850m in FY18E. As a result, the contribution of the investment management business to consolidated PAT has increased from 3% in FY16 to 6% in FY18E.
L&T Finance Holdings Limited is a non-banking financial institution-core investment company. The Company's segments include Retail and Mid Market Finance, which consists of rural products finance, personal vehicle finance, microfinance, housing finance, commercial vehicle finance, construction equipment finance, loans and leases and loan against shares; Wholesale Finance, which consists of project finance and non-project corporate finance to infra and non-infra segments across power-thermal and renewable; transportation-roads, ports and airports; telecom, and other non-infra segments; Investment Management, which consists of assets management of mutual fund and private equity fund, and Other Business, which consists of wealth management and financial product distribution. It offers a range of financial products and services across retail, corporate, housing and infrastructure finance sectors, as well as mutual fund products and investment management services.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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