Why has L&T Finance opted for a large rights issue at this point of time?
Answer
Answer
L&T Finance, the finance arm of the Larsen & Toubro group, has raised Rs.2,999 crore via rights issue. Interestingly, the demand has been quite robust as the rights issue was oversubscribed by more than 15%. The rights shares will be allotted to eligible shareholders on 23 February and the listing of these shares will happen on 26 February.
L&T Finance already has AAA credit rating and the added advantage of the backing of a parent like Larsen & Toubro with deep pockets. The rights issue will give L&T Finance the leeway to boost its capital adequacy ratios and also build the asset book in the process. It is also a proactive move considering that the RBI is looking at more stringent capital adequacy norms for systemically large NBFCs.
The rights issue was lead managed by some marquee names like Axis Capital, BOB Capital, Citigroup, Credit Suisse, HSBC Securities and ICICI Securities. Most of the larger NBFCs are also preparing for more stringent regulation by the RBI and that could lead to a greater institutionalization of the financial markets in India.