Shares of L&T Finance Holdings (LTFH) crashed at the stock exchanges on Friday as markets reacted negatively to its decision of selling its mutual fund business.
The scrip settled sharply lower by 6.90 per cent at Rs 76.90 on the BSE after falling to a day’s low of Rs 76.70 — a drop of 7.14 per cent over the previous close.
On Thursday, the non-banking finance company (NBFC) had announced the sales of its mutual funds business to HSBC Asset Management (India) Pvt Ltd for $425 million or Rs 3,200 crore. J.P. Morgan and Citi were the financial advisors to LTFH. Cyril Amarchand Mangaldas acted as the legal advisors and PwC acted as due diligence and tax advisors to LTFH on the transaction.
The business had posted total income of around Rs 348 crore in 2020-21 and had a net worth of Rs 643 crore during the period.
LTFH had said that the divestment of the business is in line with the strategic objective of unlocking value from its subsidiaries to strengthen its balance sheet. Dinanath Dubhashi, managing director & CEO, LTFH had said that the move will help the company to strengthen its balance sheet for the lending business and that the sale along with a recent capital raise will provide it with enough ammunition to increase the pace of retailisation in the lending portfolio.
Market circles, however, indicated that the street was not impressed by the valuation given to the mutual fund business. L&T Mutual Fund is the 12th largest fund house in the country and offers equity, fixed income and hybrid schemes to both retail and institutional investors. Around 64 per cent of its overall assets under management is accounted by retail investors.
