MOSL: L&T FINANCE (Buy)-Focus on raising the retail lending share-Valuations attractive at 1x BVPS
L&T FINANCE: Focus on raising the retail lending share; Valuations attractive at 1x BVPS
(LTFH IN, Mkt Cap USD2.9b, CMP INR108, TP INR130, 21% Upside, Buy)
- L&T Finance Holdings (LTFH) has grown its rural finance book ~2.5x over the past 2.5 years to INR270b. A key driver of growth has been microloans, which now comprises nearly half of rural loans. Consequently, the share of this business in the total segment is up from 15% to 27% over the same time period.
- CRISIL rated the company 'AAA' in October 2019 on the back of a diversified loan and borrowing book and support from the parent. Cost of funds increased only 30bp YoY to 8.6%. LTFH runs a positive ALM across tenors in the sub-1 year bucket.
- Profitability of the business has been largely intact over the past four quarters - the company has delivered stable ~16% RoE.
- The AMC business has witnessed 44% AAAUM CAGR over the past three years, with the share of equity increasing from 41% to 55%. With improving profitability, we believe this business is on track to deliver INR2b+ PAT in FY22 (post INR500m amortization of goodwill).
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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