Bangalore: Ahead of its public share sale, L&T Finance Holdings Ltd has raised Rs 330 crore from US private equity (PE) firm Capital International.
The company placed 60 million equity shares with the investment fund at Rs 55 each, its parent Larsen and Toubro Ltd (L&T) said in a statement to stock exchanges on Thursday.
L&T Finance is preparing to raise Rs 1,750 crore through an initial public offering (IPO), the company said in a regulatory filing in March.
“This pre-IPO round is our first step to reach up to the IPO process,” N. Sivaraman, president, L&T Finance, said by phone from Mumbai. “We have got regulatory approvals. There are a few last bits for which approvals are being sought. It’s a bit too early to say when the issue will happen.”
L&T Finance, 99.9% owned by parent L&T, plans to use proceeds from its IPO to repay Rs 345 crore to its parent, enhance its own capital base by infusing Rs 570 crore into the company, and invest Rs 535 crore in L&T Infrastructure Finance.
Investors seem to like finance companies. Deal sizes in the banking, financial services and insurance space are getting bigger. In the first six months of this year, investors have put $740 million (around Rs 3,285 crore today) in 20 deals in the banking and financial services space, compared with $657 million in 20 deals in the same period a year ago, according to data from Venture Intelligence, which tracks PE and venture capital activity.
“For financial services, on a long-term basis, investors continue to be very bullish due to the underlying demand,” K.P. Balaraj, managing director,WestBridge Capital, said in an earlier interview.
For investors, non-banking financial companies (NBFCs) offer exposure to emerging economies as they can’t invest in banks due to regulatory controls. Under the Reserve Bank of India guidelines, no individual entity can take more than 5% stake in a bank without its approval.
“Similar to an investment in a bank, an investment in a(n) NBFC gives the investor an exposure to a wider economy by the very nature of its business, including retail, infrastructure and corporate,” said Avinash Gupta, leader, financial advisory, Deloitte Touche Tohmatsu India Pvt. Ltd.
In another deal on Thursday, International Finance Corp., or IFC, a member of the World Bank Group, said it has invested Rs 12 crore in Jain Irrigation Systems Ltd’s proposed NBFC.
Earlier in May, Magma Fincorp Ltd, a non-deposit taking NBFC, received a Rs 440 crore investment in a deal led by PE firm Kohlberg Kravis Roberts and Co LP, along with IFC.
On Thursday, L&T shares gained about 3% to end at Rs 1,861.25 apiece on the Bombay Stock Exchange, on a day the benchmark Sensex climbed 1.88% to close at 19,078.30 points.
Citigroup Global Markets India Pvt. Ltd, HSBC Securities and Capital Markets (India) Pvt. Ltd and JM Financial Consultants Pvt. Ltd are the global coordinators and book runners to L&T Finance’s IPO.
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