Strong fundamentals and steep discounting of industry peer Happiest Minds make the offer more attractive.
|
LATENT VIEW OFFER AT A GLANCE |
|
| Offer Type | Book Built |
| Platform | Main Frame |
| Fresh Issue | Rs 474 Cr (24,060,914 equity shares) |
| Offer for Sale | Rs 126 Cr (63,95,939 equity shares) |
| Face Value | Re 1 |
| Price Band | Rs190 – 197 |
| Mkt/Bid Lot | 76 Nos. |
| Implied M-Cap | Rs 3896 Cr |
| Implied Equity Cap | Rs 19.78 Cr |
| Free Float | 31.89% |
| Lead Manager | Axis Cap, ICICI Sec and Haitong Sec |
| Registrar | Link Intime |
| Listing At | BSE, NSE |
|
INDICATIVE ISSUE SCHEDULE |
|
| Opening :9-Nov-2021 | Closing :11-Nov-2021 |
| Allotment :16-Nov-2021 | Refunding :17-Nov-2021 |
| Demat Credit:18-Nov-2021 | Trading :22-Nov-2021 |
The Offer
The Chennai-based Latent View Analytics Ltd is coming out with a Rs 600 Cr IPO which consists of a fresh Issue of Rs 474 Cr (24,060,914 equity shares) and an offer for sale of Rs 126 Cr (63,95,939 shares). The offer is being made through the book-building route with a price band of Rs 190-197 for Re 1 paid-up share.
Applicants should bid for a minimum lot of 76 shares and multiples thereof. The shares are proposed to be listed on the main frame of BSE and NSE on November 22, 2021. Axis Capital, ICICI Securities and Haitong Securities have been roped in as lead managers to the offer. Link Intime is acting as registrar to the issue. The bidding opens on Tuesday, November 9 and closes on Thursday, November 11, 2021.
The company proposes to utilize the net proceeds of the fresh issue towards funding inorganic growth initiatives (Rs 148 Cr), working capital requirements of subsidiary (Rs 82 Cr), investment in subsidiaries to augment their capital base for future growth (Rs 130 Cr) and for general corporate purposes (balance amount).
Lineage
The 2006-registered Latent View has been promoted by Adugudi Viswanathan Venkatraman and his spouse who are new to the investing public. Happiest Minds, incorporated five years later than Latent View and engaged in the same line of business, has grown faster than Latent. However, Latent has scored better in terms of profitability.
Latent derives a substantial portion (more than 90%) of its revenue from the United States. The company established presence in the US through its subsidiary in the year 2007. It reportedly commenced business relationship with Microsoft in 2010.
The company created its global delivery center at Ramanujan IT City, Chennai, in 2013 and established presence in Europe. The company’s global delivery center in Bangalore was inaugurated in 2017. In 2021 Latent has commenced consulting practice and has also achieved Microsoft Partner Network Gold Competency.
Key Management
The company’s founder-chairman Adugudi Viswanathan Venkatraman (51) holds a postgraduate diploma in management from IIM Calcutta, and a Bachelor of Technology in Civil Engineering from IIT Madras. He claims to have several years of experience across IT services, credit analysis and business consulting.
Co-promoter and executive director Pramadwathi Jandhyala (49) is a B.E graduate in Computer Science from BITS Pilani and a postgraduate diploma in management from IIM, Calcutta. She claims to have experience in corporate finance and credit ratings.
Stakeholders
Unlike many other recent IPOs, Latent has kept away private equities and venture capital funds. Nearly 80% of the company’s present equity is held by the promoters. Under the public category, two individuals collectively hold 17%. The balance 3% is widely held by 40 shareholders.
Post-offer for sale, the promoters would hold 68% and the seven public selling shareholders will have 14%. The average cost of holding of these 82% shares will be negative. Of the promoters’ holding, 20% is locked-in for 18 months and balance is locked for six months. The entire pre-IPO public holding except the OFS quantum is also locked-in for six months.
Business Track
Latent View is among the leading pure-play data analytics services companies in India based on their expertise of the entire value chain of data analytics from data and analytics consulting to business analytics and insights, advanced predictive analytics, data engineering and digital solutions.
Latent reportedly provides services to blue chip companies in Technology, BFSI, Consumer Packaged Goods & Retail, Industrials and other industries. The company claims to have emerged as one of the trusted partners to several Fortune 500 companies in recent years and have worked with over 30 Fortune 500 companies in the last three fiscals. Its key clients include Adobe, Uber Technology and 7-Eleven.
In terms of revenue, the industry segments Technology, CPG and Retail, Industrials, and BFSI industries contributed 63%, 10%, 17% and 10% respectively in last fiscal. Though Latent serves clients across the United States, Europe, and Asia through its subsidiaries, United States contributes the most to the revenue today.
Financial Track
Latent’s financials are quite impressive. Until July 2021 the company had a tiny capital base of just 0.82 Cr against which its earned surplus was more than Rs 445 Cr. In the Pre-IPO equity capital of Rs 17.37 Cr, as much as Rs 17.29 Cr is of bonus shares. Also, the company has so far collected a premium of less than Rs 4 Cr. Post-IPO the capital will be around Rs 20 Cr against which reserves will stand at Rs 918 Cr.
Operationally, though the company’s top line had a minor setback in fiscal 2021, its profit margin has significantly improved. A bottom line of Rs 91 Cr is indeed very attractive against the capital of less than Rs 20 Cr.
|
Latent View Consolidated Financials (in Cr) |
|||
| Period Ended |
Mar-21 |
Mar-20 |
Mar-19 |
| Revenue |
305.88 |
310.36 |
287.93 |
| Operating Profit |
104.57 |
80.43 |
72.68 |
| OPM% |
34.2 |
25.9 |
25.2 |
| Other Income |
20.83 |
19.32 |
7.97 |
| EBIDTA |
125.40 |
99.74 |
80.65 |
| EBIDTA % |
38.4 |
30.3 |
27.3 |
| Interest |
2.61 |
2.89 |
3.06 |
| Depreciation |
6.87 |
6.66 |
7.09 |
| Net Profit |
91.46 |
72.85 |
59.67 |
| Equity (Implied) |
19.78 |
0.81 |
0.81 |
| Reserves (Implied) |
917.93 |
347.11 |
266.06 |
| Borrowing |
22.61 |
0 |
0 |
| Fixed Assets |
5.0 |
5.4 |
4 |
Valuation
Latent’s upper price band of Rs 197 discounts its earnings about 43 times, book value 4 times, revenue 13 times and EBIDTA 31 times which compare quite well with the current discounting of the company’s industry peer, Happiest Minds.
|
HOW LATENT VIEW COMPARES WITH HAPPIEST MINDS |
||
|
Financials |
||
| (Amount in Cr) |
Latent View |
Happiest Minds |
| Incorporation |
January 2006 |
March 2011 |
| Market Cap |
3896 |
19509 |
| Borrowing |
22.6 |
146 |
| Fixed Assets |
5 |
1 |
| Revenue |
306 |
773 |
| Other Income |
21 |
24 |
| EBIDTA |
125 |
216 |
| Interest |
3 |
7 |
| Net Profit |
91 |
162 |
| Equity Cap |
20 |
29 |
| Reserves |
918 |
518 |
|
Stock Features |
||
| Current Price (Rs) |
197 |
1328 |
| Face Value (Rs) |
1 |
2 |
| Book Value |
47.41 |
37.24 |
| Promoter Stake % |
68.11 |
53.25 |
| Debt/Equity |
0.02 |
0.27 |
|
Profitability |
||
| OPM % |
34.2 |
24.8 |
| Net Margin % |
28 |
20.4 |
| Cash EPS |
4.97 |
12.61 |
| Earnings Per Share |
4.62 |
11.06 |
|
Return |
||
| RONW % |
19.8 |
29.8 |
| ROCE % |
24.5 |
27.9 |
|
Discounting |
||
| Price/Earnings |
42.6 |
120.1 |
| Price/Cash EPS |
39.6 |
105.3 |
| Price/Book Value |
4.2 |
35.7 |
| Price/EBIDTA |
31.1 |
90.4 |
| Price/Revenue |
12.7 |
25.2 |
Concern
- The company does not have its own office. In six years, between 2007 and 2013, it has had four registered offices!
- Also, the company needs to improve its corporate governance. It is not able to trace board and shareholders resolutions for shares allotted to the promoter in March 2007, and board resolution for transfer of shares by the promoter in August 2009. Further, it was unable to trace certain acknowledgements for the secretarial forms filed with the regulatory authority.