· L&T Finance Holdings (LTFH) has grown its rural finance book ~2.5x over the past 2.5 years to INR270b. A key driver of growth has been microfinance loans, which now comprises nearly half of rural loans. Consequently, the share of this business in the total segment is up from 15% to 27% over the same time period.

· CRISIL rated the company 'AAA' in October 2019 on the back of a diversified loan and borrowing book and support from the parent.

· The AMC business has witnessed 44% AUM CAGR over the past three years, with the share of equity increasing from 41% to 55%. With improving profitability, we believe this business is on track to deliver INR2b+ PAT in FY22 (post INR500m amortization of goodwill).

· Current valuation of 1.0x Sep'21E BVPS is undemanding. The company is poised to deliver steady retail loan growth, increasing share of AMC profits and healthy RoE (16-17%). Buy rating with a target price of INR130 (1.3x Sep'21E BVPS).

Disclaimer: The above report is compiled from information available on public platforms. inChat team advises users to check with certified experts before taking any investment decisions.

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