L&T Finance Holdings dips 7% on divestment of Asset Management business

The divestment of Mutual Fund business is in line with the strategic objective of L&T Finance Holdings to unlock value from its subsidiaries and strengthen its balance sheet, the company said.

Shares of L&T Finance Holdings dipped 7 per cent to Rs 77.05 on the BSE in Friday’s intra-day trade amid heavy volumes after the company announced divestment of its Asset Management business.

The stock of Larsen & Toubro (L&T) Group company had hit a 52-week low of Rs 71.55 on Monday, December 20, 2021. It touched 52-week high of Rs 113.40 on March 3, 2021. At 10:08 am, L&T Finance Holdings was down 6.4 per cent, as compared to 0.7 per cent decline in the S&P BSE Sensex. The trading volumes on the counter jumped 1.5 times with a combined 14.5 million equity shares having changed hands on the NSE and BSE.

The company on Thursday entered into a definitive agreement with HSBC Asset Management India (HSBC AMC) to sell its wholly-owned subsidiary L&T Investment Management (LTIM) for an aggregate amount of USD 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 the requisite regulatory approvals, the company said in a press release.

The divestment of the mutual fund business is in line with the strategic objective of L&T Finance Holdings to unlock value from its subsidiaries and strengthen its balance sheet, it said.

"LTFH will utilize the proceeds primarily for risk capital and only a small portion for growth capital. A part of the gains from this transaction could also be paid out as dividends. Given its healthy capital adequacy of over 25 per cent and expected proceeds from the sale of the MF business, LTFH is now in a position to aggressively push forward towards its stated long-term goal of retailization of its lending portfolio'', Motilal Oswal Financial Services said.

Our recent channel checks suggest that while rural demand was recently impacted because of unseasonal rainfall and delay in farm cash flows, this segment (except 2W) has maintained the run-rate achieved in September 2021 in Q3FY22 as well. We reiterate our view that LTFH is near the bottom in terms of consolidation of its loan book, with an expected pickup in Infra disbursements and Retail Housing/LAP. Even though we remain watchful of potential slippages in Real Estate Finance in H2FY22, given the buoyancy in the Real Estate sector, we expect resolutions of such exposures to be relatively quicker, it added.