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Updated on: Wednesday, November 10, 2021, 11:41 AM IST

Latent View Analytics IPO opens today: Should you subscribe?

Latent View Analytics will not receive any proceeds from the Offer for Sale and the proceeds received from the Offer for Sale will not form part of the net proceeds. / Representative Image |

Latent View Analytics will not receive any proceeds from the Offer for Sale and the proceeds received from the Offer for Sale will not form part of the net proceeds. / Representative Image |

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Latent View Analytics Ltd, analytics services provider, will open for public subscription today. The issue will close on November 12. Ahead of its IPO opening today, the firm received Rs 267.01 crore from 34 anchor investors.

The IPO comprises fresh issue of equity shares worth Rs 474 crore and an offer-for-sale of equity shares to the tune of Rs 126 crore by a promoter and some existing shareholders.

As a part of the offer-for-sale, promoter Adugudi Viswanathan Venkatraman will offload shares worth Rs 60.14 crore, shareholder Ramesh Hariharan will sell Rs 35 crore shares and Gopinath Koteeswaran will offload Rs 23.52 crore shares among others.

At present Venkatraman owns 69.63 per cent stake in the company, Koteeswaran holds 7.74 per cent stake and Hariharan has 9.67 per cent holding in the firm.

The company said that up to 75 per cent of the issue has been reserved for qualified institutional buyers, 15 per cent for non-institutional investors and the remaining 10 per cent for retail investors.

Axis Capital, ICICI Securities and Haitong Securities India are the book running lead managers to the issue.

Issue subscribed by 1.5 times so far

The company, which raised Rs 267 crore from anchor investors, got subscribed by 1.5 times so far on the first day of the bidding process on Wednesday.

The company's Rs 600-crore initial public offering (IPO) received bids for 2.62 crore equity shares, against an IPO size of 1.75 crore shares, a subscription of 1.5 times till 10.54 am, data with NSE showed.

On Tuesday, the company decided to allocate a total of 13,553,898 equity shares to 34 anchor investors at Rs 197 apiece, amounting to a transaction size of Rs 267 crore.

Abu Dhabi Investment Authority, Ashoka India Equity Investment Trust Plc, Axis Mutual Fund (MF), ICICI Prudential MF, Aditya Birla Sun Life MF, Edelweiss MF, SBI Life Insurance Company and Bajaj Allianz Life Insurance Company are among the anchor investors, according to a circular uploaded on BSE website late evening on Tuesday.

Proceeds of issue to be used for

The Company proposes to utilise the Net Proceeds of the Fresh Issue towards funding for inorganic growth initiatives, working capital requirements of LatentView Analytics Corporation--company’s material subsidiary; investment in company’s subsidiaries to augment their capital base for future growth; and general corporate purposes Offer for Sale.

The Company will not receive any proceeds from the Offer for Sale and the proceeds received from the Offer for Sale will not form part of the net proceeds.

Company's strengths

  • Consistent client driven innovation supported by functional expertise

  • Strong leadership team guiding capability development and go-to-market strategy

  • Deep and entrenched relationships with blue chip clients across industries and geographies

Risks

The company has entered into long-term partnerships with a few of its key clients, which has resulted in a limited number of them accounting for a substantial portion of company’s revenue.

If company’s existing clients do not renew their contracts with it, or expand the scope of services it provide to them, or if company’s long-term relationships with its largest clients are impaired or terminated, its revenue could decline, and company’s results of operations would be adversely impacted.

Investment in digital technologies stood at $1.3 trillion in 2020 and is expected to double to $2.4 trillion in 2024 as enterprises scale-up digital transformation efforts across business units. Also, changing consumer preferences, optimizing workflow and infrastructure modernization have accelerated investment in digital technologies.

During the COVID-19 pandemic, the enterprises that had invested in digital initiatives were better-placed as compared to the others, so this led to accelerated investment in digital technologies. Besides, leaders across industries are undertaking efforts to minimize spending on the maintenance of legacy applications and rapidly scaling up investments in digital technologies to fuel further growth.

About the firm

Incorporated in the year 2006 in Chennai, Latent Analytics is a data analytics services companies engaged in service offerings from data and analytics consulting to business analytics and insights, advanced predictive analytics, data engineering and digital solutions.

The Issuer provides services primarily to companies in Technology, CPG and Retail, Industrials, and BFSI industries. It has emerged as one of the most trusted partners to several Fortune 500 companies in recent years and has worked with over 30 Fortune 500 companies in the last three Fiscals. Some of the Issuer’s key clients include Adobe, Uber Technology and 7-Eleven.

Latent Analytics has clients based in United States, Europe, and Asia through its subsidiaries in the United States, Netherlands, Germany, United Kingdom and Singapore, and sales offices in San Jose, London and Singapore.

Company's financials

In Q1FY21 and Q1FY20 and in fiscals 2021, 2020 and 2019, revenue from operations US contributed 94.79 percent, 91.69 percent, 92.88 percent, 92.33 percent and 90.91 percent respectively.

Top five clients in FY21 and in Q1FY21 contributed 54.00% and 59.31% of revenue from operations. Revenue from operations from clients for over five years contributed 44.51 percent, 42.42 percent, 55.27 percent, 67.51 percent and 79.76 percent, of revenue from operations in Q1FY21, Q1FY20 and in FY21, FY20 and FY19 respectively.

Should you subscribe?

Hem Securities says, the Company has recognized leadership position in data and analytics with a wide range of capabilities and has deep and entrenched relationships with blue chip clients across industries and geographies. "We like scalable and attractive financial profile of company with strong leadership team guiding capability development and go-to-market strategy. Hence we recommend “Subscribe” on issue for both listing gain and long term purpose."

Investmentz.com said, "The global Data and Analytics market is expected to grow at a CAGR of 18 percent from $174 billion in FY20 to $332.6bn by FY24. Across industries, data and analytics are being leveraged by enterprises to guide business strategy and optimize spending decisions. Latent View is among the leading pure-play data analytics services companies in India. At the upper price band of Rs.197, the stock trades at 43.68x its FY22E EPS of Rs.4.51/-(based on annualized latest earning and fully diluted equity post issue). Hence, we recommend 'Subscribe' to the issue from a long-term prospective."

Reliance Securities said, "The IPO is valued at 42.6x FY21 earnings and 43.7x FY22 annualized earnings, which look to be reasonably priced. LVA states Happiest Minds Tech as its peer, which trades at an exorbitantly high valuation at 115x FY21 earnings. Notably, the growth in IT spend is expected to be largely driven by investments in digital technologies, as enterprises scale up digital transformation efforts across business units. The investment in digital technologies is expected to double from the 2020 levels to $2.4 trillion in 2024 (16.5 percent CAGR). This presents immense opportunity for LVA, which may aid it to sustain a double-digit growth in subsequent years. Hence, we recommend 'Subscribe' to this issue."

Religare said, "We believe Latent view has distinctive product offerings, relevant experience and capabilities to manage customers which aid in driving the company’s revenue and operating efficiencies. The company’s client base includes several marquee enterprises which are engaged in diverse industries across the world, and they have maintained long-term relationships with them by providing quality and customized services.

"Going ahead, the company’s strategy is to put efforts towards innovation, adopt a focused go-to-market strategy to gain visibility, strengthen client base and expand geographic presence. Also, it intends to expand via inorganic growth opportunities. On the financial front, the company’s performance is decent. From a long term perspective, we have a positive view on the company."

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Published on: Wednesday, November 10, 2021, 11:00 AM IST
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