US Equity Investor Warburg Pincus is planning to buy 25 per cent stake in L&T Finance Holdings

Today, L&T Finance Holdings jumped 9 per cent intraday. As per the media reports, US private equity firm Warburg Pincus is in talks to buy 25 per cent equity stake in the company. The promoter Larsen & Toubro (L&T) holds 72.95 per cent in the company as on June 30, 2015.

Warburg Pincus was the fourth largest Private Equity investor in India in 2014 and was ranking behind World Bank's International Finance Corp (IFC), Japanese Telecom, Softbank and Temasek. During 2000, Warburg Pincus was one of the successful investors in India and invested in Indian private sector banks such as HDFC Bank and Kotak Mahindra Bank.

The Warburg Pincus is planning to create a financial services portfolio in India and also planning to diversify by investing more than one financial services players. Hence the private equity firm is looking to acquire significant interest in various finance service companies across the country.

As per the media report, L&T Finance Holdings offered a price of Rs 83 per share and that would cost almost Rs 3574 crore for 25 per cent stake. This is a part of the parent company L&T’s strategy to unlock value from its subsidiary. Meanwhile, L&T also approached the equity market regulator SEBI to come up with public issue of its subsidiary L&T Infotech. The issue is expected to hit market in December 2015 and L&T is expected to sell 10 per cent stake in the software subsidiary.

L&T Finance Holdings reported a profit of Rs 854 crore and revenue of Rs 6196 crore in FY15. The company also in process to come up with fresh issue of equity share to Warburg Pincus and expects to use the proceeds to add the capital base and expand the business of financing trucks, commercial vehicles and construction equipment.