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L&T Finance Holdings Ltd. offers a diverse range of financial products and services across the corporate, retail and infrastructure finance sectors, as well as mutual fund products and investment management services, through direct and indirect wholly-owned subsidiaries. The company, present in 23 states in India, is raising money through Initial Public offering of around INR 12 billion.

Company has the following features from investment perspective which need to be considered while financial modeling:

  • It has a diversified and balanced mix of high growth businesses.
  • Company boasts of strong distribution network with presence across 23 states in India
  • It has a high quality loan portfolio
  • It has good financial and capital position, as well as access to multiple sources of capital

The major concern of the company is its asset-liability mismatches which could expose it to interest rate and liquidity risks. Also any changes in regulatory requirement for NBFCs by RBI may severely impact the company’s business. The regulatory risks in the overall sector and the other macro factors can pose major concerns for the company, but diversified credit portfolio L&T Finance can override these issues better than its peers.

I am providing you a rudimentary financial model that values the issue using the template attached. You can put your assumptions and find the fair value of the L&T finance Holdings share.