The Rs 702 crore initial public offer (IPO) by Happiest Minds sailed through on the first day of the bidding process on Monday, with a huge demand on the retail side.
Data from NSE and BSE shows, the public issue witnessed a 2.86 times subscription on the first day, the issue received bids for 6.67 crore shares against the IPO size of more than 2.32 crore shares.
The retail quota was subscribed over 14.61 times, Non-Institutional Investorsquota was subscribed to 61.3 percent while the portion set aside for Qualified Institutional Investors was subscribed 8 percent.
The Bengaluru-based IT company has already raised Rs 316 crore through anchor investors’ book on September 4. The company launched its Rs 702-crore public issue today and the same will close on September 9.
The issue comprises a fresh issue of Rs 110 crore and an offer for sale of 3,56,63,585 equity shares, the issue us offered by promoter Ashok Soota and investor JP Morgan-backed private equity fund CMDB II.
Ashok Soota along with one of the co-founders of Mindtree are the promoters of the company. Sootaisselling 8,414,223 shares while JP Morgan Asset Management is offloading 27,249,362 shares in the offer for sale (OFS). This would amount to Rs 592 crore. This would be JP Morgan Management’s entire 19.3 percent stake. The Rs 110 crore raised by the company by offering fresh shares, will be utilized to meet the long-term working capital requirements and general corporate purposes.
About the Happiest Minds company
Incorporated in 2011, Positioned as “Born Digital. Born Agile” Happiest Minds Ltd is a Bangalore based IT service provider company. The business of the company is divided into three categories; Digital Business Service (DBS), Product Engineering Service (PES) and Infrastructure and Management Security Service ( IMSS).
The DBS unit offers digital application development & modernization, assistance in designing & testing of operations, management of the platform, consulting and domain led offerings.
PES unit helps by transforming the potential of digital by making the product secure and smart. Wherein, IMSS provides an end to end monitoring and management capability for applications and infrastructure of the clients.
As of June 30, 2020, Happiest Minds had 148 active customers and has a global presence in countries like the US, UK, Australia, Canada and the Middle East. The business units of the company is assisted by the 3 Centres of Excellence which are Internet of Things, Analytics / Artificial Intelligence, and Digital Process Automation. In Fiscal 2020, 96.9% of the company’s revenues came from digital services which is one of the highest among Indian IT companies.
Happiest Minds delivers services across industry sectors such as Retail, Edutech, Industrial, BFSI, Hi-Tech, Engineering R&D, Manufacturing, Travel, Media and Entertainment.
Competitive Strengths
- Focused on software product development
- Strong Brand in offering Digital IT services
- End to End digital lifecycle
- Agile Engineering and Delivery
Financials
| Particulars | For the year/period ended (₹ in Million) | |||
| 30-Jun-20 | 31-Mar-20 | 31-Mar-19 | 31-Mar-18 | |
| Total Assets | 5,730.8 | 5,081.5 | 4,135.2 | 3,869.9 |
| Total Revenue | 1,869.9 | 7,142.3 | 6,018.1 | 4,891.2 |
| Profit After Tax | 501.8 | 501.8 | 501.8 | 501.8 |
Valuations
At the price band is Rs 165-166, the stock commands a P/E value of 26.6 times FY20 P/E, which is comparable to its larger mid-cap peers such as LTI, Mindtree and Coforge and at a discount to faster-growing Eastern European companies
Analysts view
Analysts are mixed on the issue, with a few recommending it for risk-taking investors. “The pricing of the issue is very high. On a long-term basis, the stock may not be very attractive. But given the strong growth shown by the company in FY20 and huge demand for midcap and smallcap IT stocks these days, risk-taking investors can consider the issue for a short-to-mid term basis,” said Vinod Nair of Geojit Financial Services.
Astha Jain of Hem Securities said the company is bringing the issue at post-issue PE of 12 times on an annualized Q1FY21 EPS basis.
“The company has shown strong growth in its financials in the last couple of years. It is a strong brand in digital IT services with growing high revenue-generating customer accounts, with a high proportion of repeat revenues and revenues from mature markets. We like the scalable business model of the company, which has multiple drivers of steady growth with experienced leadership focused on sound corporate governance practices,” she said while recommending ‘subscribe’ on the issue for both for short & long term basis.