L&T Finance Holdings‘ share price fell by almost 5 per cent in morning trade on BSE on Tuesday (July 4) in an otherwise positive market. The stock opened at ₹135.95 against the previous close of ₹137.30 and fell 4.88 per cent to the level of ₹130.60.
The company in a BSE filing on July 1 informed Dinanath Dubhashi, Managing Director & CEO of the firm will superannuate on April 30, 2024. It also informed about the appointment of Sudipta Roy as the Chief Operating Officer. Roy will assume the position of Managing Director and CEO with effect from January 24, 2024, after the necessary approvals, the company said.
Roy, as per the company’s statement, is a consumer banking and payments professional with over 24 years of financial services experience. He joined L&T Finance Holdings from ICICI Bank, where he served as Group Head and managed diverse businesses like unsecured assets, cards, payment solutions, student ecosystem, e-commerce and merchant ecosystem, millennial banking and API banking. Before his assignment with ICICI Bank in 2010, he worked for Citibank and Deutsche Bank.
Meanwhile, Kotak Institutional Equities has downgraded the stock to a ‘sell’ from a ‘reduce’ with a revised target price of ₹95 from ₹90 earlier.
The brokerage firm pointed out that L&T Finance Holdings’ stock has rallied recently, likely in anticipation of the management change, implying that Steet is excited about the new CEO.
“Apart from limited information on the CEO, we would like to highlight that L&T Finance Holdings’ turnaround is a long process due to structural constraints and its profitability cannot change overnight,” said Kotak.
Shares of L&T Finance Holdings have surged over 93 per cent in the last one year thanks to their low valuation and growth prospects. Equity benchmark Sensex has risen about 23 per cent in the same period. L&T Finance stock hit its 52-week high of ₹140.20 in the previous session on July 3 on BSE.
Kotak believes L&T Finance Holdings’ challenges of low near-term growth and subdued RoE (return on equities) don’t have instant fixes.
“L&T Finance Holdings will need to run down its wholesale book and maintain momentum in retail loans, including select segments that are volatile or in which it has no track record. Needless to mention, this should be done without compromising on asset quality performance,” said Kotak.
“We assume that the stressed book is currently fully provided for. High growth in real estate and wholesale loans, asset quality challenges in select segments, capital issuance during Covid and a prolonged period of no loan growth are key reasons for structural challenges to profitability that L&T Finance Holdings faces today,” Kotak said.
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Disclaimer: The views and recommendations given in this article are those of the brokerage firm. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
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Updated: 04 Jul 2023, 12:27 PM IST