India: Happiest Minds IPO Opens For Subscription Soon

The IPO consists of fresh issue of 66.2 lakh shares and offer of sale of 356.6 lakh offer of sale. Post IPO, the promoter’s stake will come down to 53% from 62%. CMDB-ll (JP Morgan Asset Management) will also offer 27,249,362 shares through the offer-for-sale route.

The company’s promoter Ashok Soota was the founding chairman and managing director of MindTree Limited. He was also the vice chairman of Wipro Limited. Happiest Minds Technologies was founded in 2011.

Listing and Lot Size

Happiest Minds Technologies shares will be listed on the BSE and the NSE. The minimum lot size is 90, which means investors have to apply for a minimum of 90 shares and in multiples thereafter. According to brokerages, Happiest Minds shares are likely to get listed on September 17, 2020.

KFin Technologies Private Limited is the registrar of the IPO.

About the company

As of June 30, 2020, it had 148 active customers with a global presence in countries like US, UK, Australia, Canada and the Middle East. It draws over 95% of its revenue from digital IT services.

In FY20, the company had reported revenues of ₹714 crore. This represents a CAGR for total income of 20.8% between FY18 and FY20. It has over 2,600 employees. In FY20, it had reported profit of ₹72 crore.

He added that while COVID-19 has hit the world and the information technology industry, about 76% of the company’s business saw no or marginal impact.

Soota noted that the company has limited presence in the travel and hospitality segment which are among the worst-hit.

Risk Factors

The adverse effects of coronavirus may remain uncertain. Also, the company’s revenues are highly dependent on a limited number of industry verticals. Any decline in demand for outsourced services in these industry verticals could reduce revenues and materially adversely affect business, financial condition and results of operations.

What analysts say

Geojit Financial Services recommends a subscribe rating on the IPO for long term perspective.”

“Happiest Minds Technologies is a strong brand in the digital IT services space. Company derives 97% of its revenue from digital services while compared to 50% by its closest midcap peer. On the financial front FY18-20 revenue growth stood at 23% on a CAGR basis while profit witnessed a steady growth from Rs.14 crore in FY19 to Rs.72 crore in FY20 due to increase in sales, lower operating expenses and 50% reduction in interest cost in FY20,” says Vinod Nair, Head of Research at Geojit Financial Services.

“However, Q1FY21 numbers came flat at Rs.177 crore and on an annualized basis just showing a 1% growth in FY21E. As per the management 76% of the business was not impacted by Covid 19 pandemic which is positive for long term. Based on FY20 EPS, the P/E works out to be 26x which is close to large cap IT players. Global direct peers based on digital revenue as per the RHP (Red Herring Prospectus) which are listed in respective markets trades at steep premium on a 1 year forward P/E basis (Globant : 61x, EPAM: 48.8x, Endava: 38.8x). If we annualize the Q1FY21 numbers and based on the EPS P/E works out to be 12x which is attractive compared to global as well as domestic peers. Given the strong management as Ashok Soota, co-founder of Mindtree, being the promoter and potential for growth in the digital space post the pandemic era and attractive valuation we recommend a subscribe rating on the IPO for long term perspective.”

This article was first published on livemint.com.