Stake sale in L&T IDPL augurs well for Larsen & Toubro; brokerages see up to 13% upside, suggest buy

Larsen Toubro (L&T) shares fell on Monday after the company announced transfer of its entire shareholding in L&T Infrastructure Development Projects Limited (L&T IDPL) along with its subsidiaries. Brokerage firms Jefferies and Macquarie have maintained buy rating with up to 13 per cent upside.

The stock was trading at Rs 2,169.75 on the NSE around 12:45 pm, down by Rs 5.25 or 0.24 per cent.

LTIDPL is a joint venture between Larsen & Toubro Limited and Canada Pension Plan Investment Board (CPP Investments) holding 51 per cent and 49 per cent shares respectively. The company informed the exchanges about the share purchase agreement to offload its entire stake to Epic Concesiones Private Limited on Friday, 16 December.

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Divestment of non-core assets key to improve overall returns, Macquarie noted while putting a price target of Rs 2240. The stock was recommended at a price of Rs 2175. Macquarie has maintained an ‘Outperform’ rating on this stock. 

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L&T has sold 100 per cent stake in L&T IDPL, for Rs 60 billion enterprise value, Jefferies said adding that the gross equity receipts with L&T's 51 per cent share is at Rs 27.2 billion which implies Rs 13.9 billion (Rs10/share) receipt, it said. 

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It said that over the next 12-36 months Nabha Power & Hyderabad Metro which are on company’s divestment list, could be targeted.  

Jefferies has a more ambitious target on L&T compared to its other peer at Rs 2455 which is Rs 280 per share gains or a 13 per cent upside from the price at which it is recommended.  

The stock has outperformed the Nifty50 by over 9 per cent and has given returns of 16 per cent versus 6.3 per cent returned by the 50-stock broader index.

Momentum indicators RSI and MFI suggest that the stock is approaching towards the overbought territory. While the former is at 69.8, the latter is at 63.4. A number above 30 is considered oversold and above 70 suggests an overbought situation.  

(Disclaimer: The views/suggestions/advises expressed here in this article is solely by investment experts. Zee Business suggests its readers to consult with their investment advisers before making any financial decision.)