Engineering and construction major Larsen and Toubro 's subsidiary company L&T Finance Holdings is set to open its initial public offering (IPO) for subscription on July 27. The company plans to raise about Rs 1,092 crore out of the total issue size of Rs 1,245 crore.
On one hand where investors have shown great response over this subscription of L&T IPO, some eyebrows have been raised about its pricing as well.
CNBC-TV18’s managing editor Udayan Mukherjee feels this as a very good pedigree household. He said, "The promoters in India are very smart. The problem with them is if they know that there is a premium which can be taken out of their pedigree or brand name, then they will always take it out in the IPO."
Mukherjee suggests going for the L&T Finance IPO at Rs 45. Mujherjee stated, "L&T has a lot of goodwill in the market. The IPO will still go through as it is L&T and not too many things come from that basket."
This stock has consistently created wealth for the shareholders. They have used to eek out a lot of premium from minority shareholders and prices the issue at a fairly lofty level. Mukherjee explained, "Given L&T’s goodwill in the market, they might have done well to do the issue at Rs 45 which would still be at a price to book of more than two times and then left the last Rs 8-10 for shareholders. Instead, they chose to do the issue on the Rs 20 book value at close to 2.8 times book."
"If you compare it with other non-banking financial banking companies (NBFCs) given their return ratios which is not the highest, it is probably a little bit of a lofty pricing. It is 30% premium to IDFC which is not a bad management," he added.
Mukherjee believes that the valuations are expensive with the credibility and pedigree of this organisation. Just like the pre IPO placement, the issue might go through.
Above a price of Rs 60, if the issue gets done at Rs 55-59 and goes to Rs 60-65 kind of prices, then it is more than three times book. There isn’t a single stock barring HDFC in our firmament which trades at more than three times book consistently.
Mukherjee calls it as lofty valuations as they haven’t left too much on the table. Post issue gains to remain a mystery despite its pedigree.
On one hand where investors have shown great response over this subscription of L&T IPO, some eyebrows have been raised about its pricing as well.
CNBC-TV18’s managing editor Udayan Mukherjee feels this as a very good pedigree household. He said, "The promoters in India are very smart. The problem with them is if they know that there is a premium which can be taken out of their pedigree or brand name, then they will always take it out in the IPO."
Mukherjee suggests going for the L&T Finance IPO at Rs 45. Mujherjee stated, "L&T has a lot of goodwill in the market. The IPO will still go through as it is L&T and not too many things come from that basket."
This stock has consistently created wealth for the shareholders. They have used to eek out a lot of premium from minority shareholders and prices the issue at a fairly lofty level. Mukherjee explained, "Given L&T’s goodwill in the market, they might have done well to do the issue at Rs 45 which would still be at a price to book of more than two times and then left the last Rs 8-10 for shareholders. Instead, they chose to do the issue on the Rs 20 book value at close to 2.8 times book."
"If you compare it with other non-banking financial banking companies (NBFCs) given their return ratios which is not the highest, it is probably a little bit of a lofty pricing. It is 30% premium to IDFC which is not a bad management," he added.
Mukherjee believes that the valuations are expensive with the credibility and pedigree of this organisation. Just like the pre IPO placement, the issue might go through.
Above a price of Rs 60, if the issue gets done at Rs 55-59 and goes to Rs 60-65 kind of prices, then it is more than three times book. There isn’t a single stock barring HDFC in our firmament which trades at more than three times book consistently.
Mukherjee calls it as lofty valuations as they haven’t left too much on the table. Post issue gains to remain a mystery despite its pedigree.
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