Let me start with the caveats. I am a shareholder of L&T, and have been a shareholder for a very long period. I did my articles in Sharp and Tannan, which means I have done the audit of L&T. It was a great audit to be in – you got good food, good work, lot of paper to do your maths, costing and accountancy. So all fond memories in all my interactions. We could leave the audit room in a mess, and find it perfectly clean the next day. We met good to great quality of people – so the overall feeling towards this company has always been good.
Been a shareholder also (upwards of 30 years now) – so no regrets on that count too. Good people, good processes, good returns – all this as a construction, engineering giant.
Now coming to L&T finance, I have no clue what is the attraction that big groups have towards finance. Tatas, Birlas, L&T – none of them have a great performance that would make me rush to buy their shares.
L&T finance is a wholesale financing company – clearly the margins would be under tremendous pressure. Yes they have a reputation, but they do not have size. There is nothing that they are doing which a SBI or even a smaller bank cannot do. Also in a prospectus there is no need to disclose sticky assets. Ever-greening is another worry. Do not see the subsidiaries in a hurry to make money – Distribution, mutual fund and capital markets are all TOUGH businesses…
Into all this if I have to enter paying a premium, well I am not in that game.
Will I get the share at a price below the issue price?
I am not a buyer of a business where the margins are so tight – I would rather buy a bank share – somebody who is building up fast like Dhanalakshmi bank, Axis bank or a well established bank with good NIM and good asset quality – like Hdfc bank.
PS: I am a shareholder of Hdfc bank and no other private sector bank as of now when I am writing this blog.
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