Why L&T Finance Share Price is Rising

The Indian finance sector is a bustling marketplace. It plays a crucial role in propelling economic growth by providing essential financial resources for businesses and individuals.

Speaking of the finance sector, L&T Finance stands out as a prominent participant in this dynamic landscape, offering a wide array of financial products and services.

Think of L&T Finance as the bridge connecting people's aspirations with the financial means to achieve them, from fueling small business ventures to personal milestones.

While L&T Finance's share price has seen a decent increase of 11.6% over the past year, the last month has been a game-changer.

The company's share price witnessed a remarkable surge of 17.4%, leaving investors eager to understand the factors propelling this sudden and significant rise.

Let's delve deeper and explore the potential reasons behind L&T Finance's recent rally.

#1 FII and DII Inflow

In the past year, there has been a noticeable shift in the investment landscape for L&T Finance, with institutional investors playing a pivotal role.

According to the data, foreign institutional investors (FIIs) and domestic institutional investors (DIIs), specifically mutual funds, have adjusted their stakes in the company over the last four quarters.

In June 2023, FII holdings stood at 13.9%, gradually decreasing to 10.7% by December 2023 before rebounding slightly to 11.04% by March 2024.

Conversely, mutual fund holdings have shown a consistent upward trajectory, rising from 0.9% in June 2023 to 3.4% by March 2024. This increase in mutual fund holdings indicates a growing confidence among domestic investors.

The notable surge in mutual fund investments has been a significant driver for the recent rise in its share price. Domestic investors' growing stake in the company suggests a strong belief in its potential and stability. This in turn, bolsters market confidence.

Last month, Morgan Stanley acquired 31.3 million (m) equity shares in the company for over Rs 5.3 billion (bn). This substantial investment underscores the growing interest and confidence among institutional investors.

Brokerages like UBS have also raised their rating for L&T Finance, reflecting investor confidence.

In summary, the rising contribution of DIIs, particularly mutual funds, combined with positive ratings from brokerages, has played a crucial role in pushing L&T Finance share price higher.

L&T Shareholding Patten Summary (2023-24)

Quarter	23-Jun	23-Sep	23-Dec	24-Mar
FII Holding (%)	13.9	12.1	10.7	11
Mutual Fund (%)	0.9	1.4	2.7	3.4

Data Source: Ace Equity

#2 Big Growth Plans

L&T Finance is targeting a 25% compound annual growth rate (CAGR) over the next few years.

The company aims to consolidate its retail lending business, as stated by a top company official. By 2026, the company plans to exit the wholesale segment entirely. This transformation will turn it into a 100% retail non-banking financial company (NBFC) from its current 94%.

The managing director & CEO of the company stated, "Fuelled by the revival in credit offtake, we will maintain our robust growth trajectory of 25% CAGR over the next few years."

He noted that the home loan portfolio, with its larger ticket size, is expected to surpass microfinance assets in the coming years.

Despite this, micro-lending will likely remain the company's most profitable segment due to its inherent nature.

The company will focus on consolidating its existing financial services lines for at least the next two years. There is strong growth potential in its current offerings.

Presently, micro-credit lending accounts for 31% of the company's total book size of Rs 800 bn. Mortgages and loans against property contribute another 23%.

The home loan business targets tier-I and tier-II cities with a minimum ticket size of Rs 0.3 m. The company collaborates actively with large builders. It also operates in segments such as tractor finance, two-wheeler finance, personal loans, and the SME sector.

The top management highlighted the expected stronger growth in the eastern Indian region through the branding of their new home loan product.

These ambitious growth plans and strategic shifts are boosting investor confidence.

This has contributed to the recent surge in L&T Finance's share price. The company's focus on retail lending and its exit from the wholesale segment position it for sustainable growth and increased profitability in the coming years.

How L&T Finance Share Price has Performed Recently

In the last month, L&T Finance share price rallied 17.4%.

In 2024, so far its share price is up 11.6%.

The stock touched its 52-week high of Rs 193.4 on 2 July 2024 and a 52-week low of Rs 117.1 on 21 August 2023.

About L&T Finance

L&T Finance Holdings was incorporated on 1 May 2008 as a public limited company with the name L&T Capital Holdings.

The company was promoted by Larsen & Toubro as a holding company for their financial services business.

It is a financial holding company offering a focused range of financial products and services across rural, housing and wholesale finance sectors, as well as mutual fund products and wealth management services, through its wholly-owned subsidiaries -L&T Finance, L&T Housing

Finance, L&T Infrastructure Finance Company, L&T Investment Management, L&T Capital Markets, and L&T Infra Debt Fund.

L&T Finance Holdings is registered with RBI as a systematically important core investment company (CIC-ND-SI).

For more details about the company, you can have a look at L&T Finance Holdings factsheet and quarterly results on our website.

You can also compare L&T Finance Holdings with its peers.

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