Hinduja Leyland Finance and NDL Ventures Merger: Valuation Insights

A merger involving Hinduja Leyland Finance Limited (HLF) and NDL Ventures Limited has prompted discussions regarding the valuation of HLF in the unlisted market. The merger, announced on November 25, 2025, is structured as a Scheme of Merger by Absorption, which will see HLF integrated into NDL Ventures.

Merger Details Under the terms of the merger, shareholders of HLF will receive 25 shares of NDL Ventures for every 10 shares of HLF they hold. This equates to a conversion ratio of 1 HLF share being equivalent to 2.5 NDL shares.

For example, purchasing 100 HLF shares at ₹265 each would cost ₹26,500. Following the merger, shareholders would receive 250 NDL shares, valued at approximately ₹24,525. This indicates an initial loss of ₹1,975 relative to the purchase price.

Valuation Analysis The fair value of HLF shares is a critical point of consideration. Currently, HLF is trading at ₹265, which represents a price-to-book (P/B) ratio of 1.66. Comparatively, the anticipated P/B ratio after the merger will be about 1.53, based on NDL Ventures' expected price of ₹98.1.

Industry averages for non-banking financial companies (NBFCs) typically range from 1.5 to 2.5 P/B. Therefore, the current valuation of HLF is not excessively high, but the merger presents unique considerations for investors.

Investment Considerations Investors should note several factors regarding the merger:

1. Quality of Business: HLF boasts a return on equity (ROE) of 8.9%, significantly higher than NDL's 0.96%. This disparity raises questions about the valuation premium being paid for HLF shares.
2. Liquidity Post-Merger: Upon completion of the merger, HLF shareholders will transition to holding listed NDL shares, which typically offer better liquidity than unlisted shares.
3. Market Optimism: There is a belief among some investors that NDL Ventures might appreciate in value prior to the merger, potentially aligning with a break-even point for HLF shareholders.
4. Market Inefficiencies: The unlisted market can experience delays in price adjustments, affecting the valuation dynamics.

The merger comes with inherent risks. HLF shares have shown a volatility range, having fallen from ₹121 to ₹98 in the past year. This fluctuation highlights the potential for loss during the transition period. Additionally, regulatory approvals from the Securities and Exchange Board of India (SEBI) and the National Company Law Tribunal (NCLT) are required, adding an element of uncertainty regarding the merger timeline.

Fair Value Estimates Analysts suggest that the fair value for HLF shares, based on the merger math, lies between ₹245 and ₹250, equating to a P/B ratio of 1.53 to 1.56. A price range of ₹220 to ₹230 would provide a safer margin, while valuations below ₹220 are considered an attractive entry point for investors seeking downside protection.

Ultimately, as the merger progresses, HLF can be seen as leveraging NDL Ventures to gain public market access and enhanced liquidity. The strategic move is aimed at fortifying HLF’s position within the financial sector, despite the complexities involved in the transition.

This analysis serves to inform potential investors about the implications of the merger and the valuation of HLF within the unlisted market context. Investors are advised to conduct thorough research and consider market conditions before making investment decisions regarding HLF and NDL Ventures.