L&T valuation doesn't capture multi-year investment cycle

by IANS |

New Delhi, Nov 8 (IANS) The relative movement in market capitalization of L&T and its subsidiaries over the past few months and inexpensive valuations of its core E&C business would suggest that the market is sceptical of value-creation in the E&C business of L&T and value-unlocking from L&Ts subsidiaries despite a significant increase in their market capitalisation over the past 12 months, Kotak Institutional Equities said in a report.

"The former is probably not correct since the market is very excited about the prospects of a multi-year investment cycle in India and LT is well-positioned to participate in the same. The latter may require restructuring LT's conglomerate structure," it said.

"In our view, LT's valuation does not adequately capture a potential multi-year investment cycle and LT's unique position in a large market opportunity."

"We see no reason for LT's holding company discount to be at such high levels, especially as its main subsidiary businesses are either doing remarkably well such as LTITL, LTTS, MTCL (its three IT services companies) or are likely to recover from the negative impact of the Covid-19 pandemic such as LTHF (financial services entity).

"The market may be sceptical about value-unlocking despite large value creation in the subsidiaries in the past 12-18 months," the report said.

Our reverse 'market-cap' exercises show that the implied market capitalization of the E&C business of L&T has significantly trailed the growth in market capitalization of its subsidiaries.

Latest News
'Everyone felt Covid's impact in the country', Congress slams govt Fri, Dec 03, 2021, 12:02 AM
Omicron: No case detected in TN so far, says Health Minister Fri, Dec 03, 2021, 12:01 AM
Wanted to give expensive gift to girlfriend, says i-Phone thief Thu, Dec 02, 2021, 11:59 PM
Omicron cases' infected contacts showing mild symptoms: K'taka Health Min Thu, Dec 02, 2021, 11:58 PM
Rajya Sabha passes Dam Safety Bill with amendment Thu, Dec 02, 2021, 11:57 PM
Over one-third wards dominated by females in KMC Thu, Dec 02, 2021, 11:56 PM
Steep fall for ex-Mumbai Police chief Param Bir Singh as suspension announced (Roundup) Thu, Dec 02, 2021, 11:54 PM
Over 1.5 lakh expected to attend PM's rally in Dehradun Thu, Dec 02, 2021, 11:53 PM
Goa BJP chief dares Cong to name minister accused of sex scandal Thu, Dec 02, 2021, 11:53 PM
HC asks Delhi govt to respond on revision of headload workers' wages Thu, Dec 02, 2021, 11:51 PM
Gurugram on alert amid Omicron scare Thu, Dec 02, 2021, 11:50 PM
Over 18 lakh farmers benefited with MSP value of Rs 57,032.03 cr: Govt Thu, Dec 02, 2021, 11:49 PM
Ridership, profit lower than projections for Delhi Metro's Phase 3: CAG Thu, Dec 02, 2021, 11:48 PM
DU Prof who researched on Parkinson's made Fellow of National Academy of Sciences Thu, Dec 02, 2021, 11:45 PM
'Jagdish Thakor to be new Gujarat Pradesh Congress Committee president, Rathwa LOP' Thu, Dec 02, 2021, 11:44 PM