Taking advantage of huge retail demand, Happiest Minds’ 702 million rupee initial public offering (IPO) took just over two hours into the bidding process on Monday.
The issue received offers for 2,37,01,590 shares, which was 1.01 times the issue size of 2,32,59,550 shares, data compiled from NSE and BSE showed.
The retail share was subscribed more than 5 times. The NII share was subscribed at 20%, while the QIB share was subscribed at 8%.
The digital company, whose issue is sold in the Rs 165-166 price band, raised Rs 316 crore on Friday from 25 anchor investors including the Government of Singapore, Goldman Sachs, Kuwait Investment Authority, Nomura Funds Ireland, Jupiter India and Pacific Horizon Investment. In the upper price band, the issue seeks a valuation of 26.76 times earnings per share for fiscal year 20.
With services like the cloud and security and analytics accounting for 97 percent of its revenue, the Bengaluru-based company promotes itself more as a digital services firm than legacy IT players, who are 35-50. percent of revenue from the segment.
Happiest Minds IPO: Everything You Need to Know
IPO Mart
IPO mart is vibrating once again as stock markets cleverly rebound from March lows. On Monday, Happiest Minds Technologies will come out with its Rs 700 crore edition. But before you click “subscribe” to the issue, here are some things to know:
About the company
Happiest Minds Technologies is a Bengaluru-based mid-tier IT service provider. The company offers three services: Digital Business Services (DBS); Product Engineering Services (PES) and Security Services and Infrastructure Management (IMSS). Of these, PES alone accounts for 51 percent of the company’s revenue.) This segment helps software product companies create products, platforms, and services. The company is promoted by Ashok Soota, one of the co-founders of Mindtree.
The company sees global players such as EPAM, Endava and Globant as its competitors. The digital firm has 157 active clients and derives about 77.5 percent of its revenue from the US and 11.9 percent from India.
It had an employee base of 2,600 as of June 30. She had 24 clients in the $ 1 to 5 million range and 1 client in the $ 10 million range.
A look at finances
For the June quarter, the company reported a net profit of Rs 50.2 crore on revenue of Rs 177 crore. The company had posted a net loss of Rs 22.47 crore in FY 2018 and its profit for FY 19 and 20 were Rs 14.21 crore and Rs 71.71 crore respectively. Operating income increased 22.8 percent compounded annually during the same period to Rs 698.21 crore. The company reported revenue of Rs 590.36 crore in FY19 and Rs 462.89 crore in FY18.
The company’s top 10 customers account for 48 percent of revenue, with the top customer only contributing 12 percent of its revenue.
Risks
The financial performance of the company over the past three years appears to be erratic. Given its smaller size, business scalability can be a problem amid intense competition. In the June quarter, revenue was 177 million rupees, while net profit was 50.2 million rupees, helped by lower operating expenses. Such a high net margin of 28% may not be sustainable. After annualizing the net profit for the June quarter, the IPO is valued at a price-earnings (P / E) multiple of 12 over equity after the IPO. Considering the sharp jump in earnings during the quarter, which may not be sustained, and the small scale of operations, the valuation looks rich.
“The price of the item is very high. In the long term, stocks may not be very attractive. But given the strong growth shown by the company in fiscal 2020 and the high demand for small and mid-cap IT stocks these days, risk-taking investors may consider the problem in the short and medium term, ”said Vinod Nair. for Geojit Financial Services. .
Reviews
At the Rs 165-166 price band, the stock has a P / E value of 26.6 times the P / E of Fiscal Year 20, which is comparable to its larger mid-cap peers like LTI, Mindtree and Coforge and at a discount for faster growth. Eastern European companies, IIFL said.
“The company has shown strong growth in its finances in recent years. It is a strong brand in digital IT services with growing and revenue-generating customer accounts, with a high proportion of repeat revenue and revenue from mature markets. We like the company’s scalable business model, which has multiple drivers of constant growth with experienced leadership focused on sound corporate governance practices, “said Astha Jain of Hem Securities.
Motilal Oswal Securities said the company’s valuations are comparable to those of larger mid-size IT companies. He likes the company given its strong presence in digital services, business model with end-to-end capabilities, and rapid improvement in financial performance.
“Investors can ‘subscribe’ to the IPO. Also considering market conditions and the bright prospects for IT companies post-Covid era, trading gains can also be made,” the brokerage said.
Angel Broking said that given the high exposure to digital services and strong developer training, the company will continue to grow at a faster pace compared to similarly sized companies and therefore should rank higher for the group of pairs.
Choice Broking said the issue appears to be fully priced compared to its domestic peers, the brokerage said. But she noted that the company cannot be completely comparable to its national IT peers. “There are international peers, which get almost all their income from digital services, trading at a P / E multiple that ranges between 67 and 139 times. Assuming that the valuations of these companies in the US markets are foamy, the valuation required by Happiest. Minds seem to be attractive, “she said.
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