L&T Finance Holdings down 7% following the divestiture of its asset management activities

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Shares of L&T Finance Holdings fell 7% to Rs 77.05 on BSE during intraday trading on Friday amid high volumes after the company announced the divestiture of its asset management business.

The shares of the Larsen & Toubro (L&T) group company hit a 52-week low at Rs 71.55 on Monday, December 20, 2021. It hit a 52-week high of Rs 113.40 on March 3, 2021. At 10:08 a.m., L&T Finance Holdings was down 6.4%, compared to 0.7% for the S&P BSE Sensex. Over-the-counter trading volumes increased 1.5 times, with a total of 14.5 million shares changing hands on the NSE and BSE.

The company on Thursday reached a definitive deal with HSBC Asset Management India (HSBC AMC) to sell its wholly-owned subsidiary L&T Investment Management (LTIM) for a total amount of $ 425 million. LTIM is the investment manager of L&T Mutual Fund.

In addition, L&T Finance Holdings will also be entitled to excess cash in LTIM until the completion of the acquisition. The transaction is subject to required regulatory approvals, the company said in a press release.

The divestiture of the mutual fund business is in line with L&T Finance Holdings’ strategic objective to unlock value from its subsidiaries and strengthen its balance sheet, he said.

“LTFH will use the proceeds primarily for venture capital and only a small portion for growth capital. A portion of the gains from this transaction could also be paid out in the form of dividends. Given its good capital adequacy of over 25% and expected proceeds from the sale of the MF business, LTFH is now in a position to aggressively move forward towards its stated long term goal of selling. retail of its loan portfolio, ” said Motilal Oswal Financial Services.

Our recent channel checks suggest that although rural demand has recently been hit due to unusual rainfall and a delay in agricultural cash flows, this segment (except 2W) has also maintained the execution rate achieved in September 2021 at T3FY22. We reiterate our view that LTFH is close to bottom in terms of consolidating its loan portfolio, with an expected pick-up in Infra and Retail Housing / LAP disbursements. While we remain alert to potential real estate finance slippages in S2FY22, given the dynamism of the real estate sector, we expect resolutions to such exposures to be relatively quicker, he added.

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