IPO Size: Rs. 600 cr
- 80% is fresh issue for acquisitions (Rs. 148 cr), working cap (Rs. 82 cr), growth in non-US geographies (Rs. 130 cr)
- 20% offer for sale (OFS) by promoter and other individuals
Price band: Rs. 190-197 per share
Mcap: Rs. 3,896 cr, implying 15% dilution
IPO Date: Wed 10th Nov to Fri 12th Nov 2021, Listing 22nd Nov 2021:
Grey Market Premium (GMP): We are strongly against ‘grey market premium’ as it is an unofficial figure, against SEBI guidelines.
- High margin business: On FY21 revenue of Rs. 300 cr, EBITDA margin was as high as 41%, although 3-4% temporary benefit due to travel curbs and lower other expenses, as seen across the IT sector. While Q1FY22 EBITDA margin already slipped to 35% and may further trend downwards, it is nevertheless high margin, leading to 20%+ net margin consistently since FY19.
- Peculiar case of 75% allocation for QIB, even though profitable business. Thus, post listing retail float will be quite low at 3.75% which may sustain premium valuations.
- High growth potential as industry demand for data analytics extremely high, with digital spends increasing. Latent View is looking to diversify into non-US geographies and increase focus on non-technology clients.
- Muted Revenue Growth of 3% between FY19-21, when industry growing at 16-18%. Hitherto company focused on margins, to gain premium end of analytics business, which reversed in Q1FY22, wherein revenue grew 20% YoY to Rs. 88 cr, but EBITDA remained flat YoY at Rs. 31 cr.
- Small Size of Operations lead to 3 peculiar risks faced by most small IT companies: (i) Geographic concentration (90% revenue from US), (ii) Client concentration 50% revenue from top 6 of 45 clients, (iii) High Attrition of 27% in FY21 vs industry average of 16%.
- Unnecessary Dilution, when company has Rs. 250 cr cash surplus. This will result in 21-22% RoE to contract to 16-17% going forward, as about 15% of PBT is contributed by interest income.