L&T Finance shortlists 6 bankers for Rs 3,000 crore-rights issue

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L&T finance holding, the NBFC arm of diversified conglomerate Larsen and Toubro, has shortlisted six merchant bankers Citi, UBS, HSBC, Credit Suisse, Motilal Oswal, and Axis Capital for its Rs 3,000 crore-rights issue and to fortify its balance sheet. Additional banks may be taken on board at a later stage, Moneycontrol reported.

The Rs 3,000-crore rights issue will likely be launched in January 2021, as per Moneycontrol.

“The board approved the offer and issuance of fully paid-up equity shares of the company for an amount not exceeding Rs 3,000 crore by way of a rights issue to the eligible equity shareholders of the company,” L&T Finance had said in a regulatory filing.

The firm’s board had approved the rights issue on November 9, 2020. The details of the issue, including price and entitlement ratio, would be determined in due course, it said. Its share price has risen 31 percent in the last three months.

Non-banking finance companies (NBFCs) like M&M Finance and Shriram Transport Finance have raised Rs 3,089 crore and Rs 1,500 crore, respectively, via rights issues. Heavyweights like ICICI Bank, HDFC Ltd, and Axis Bank have together raised nearly Rs 40,000 crore via the qualified institutional placement (QIP) route.

Recently, a working committee set up by the Reserve Bank of India released path-breaking proposals to review the ownership and corporate structure of private sector banks. It committee also suggested the conversion of large NBFCs into banks.

Brokerages see the proposal as favourable to large NBFCs promoted by corporate houses like L&T Finance along with the likes of Bajaj Finance, Mahindra Finance, Aditya Birla Capital, and others who may now look forward to converting to a universal bank.

As per the Moneycontrol’s report, as part of the conglomerate’s non-core asset monetization drive, L&T Finance had revived plans to sell its mutual fund business and appointed JP Morgan to advise on the transaction.

A subsequent report on April 30 had named private equity giant Blackstone and three other entities as potential suitors for the transaction.