L&T Finance Holdings Ltd (LTFH), promoted by L&T Ltd (64.2%) is a leading
NBFC with a diversified lending portfolio. Over the last one year the
management has restructured its business model and is focusing on selective
segments where it has competitive advantage, simultaneously downsizing
some products which were making losses.
Outlook & Valuation: As LTFH operates in multiple segments, we have
valued it based on SOTP. We have valued the rural finance segment at 2.5x,
while the housing finance and wholesale finance has been valued at 3x and
2x its FY2020E BV each. LTFH’s AMC arm, L&T MF has been valued at 5% of
average AUM. Accordingly, we have arrived at a fair value of Rs 179 based
on SOTP, and hence recommend BUY on the stock.