Current IPO:L&T Infotech
L&T Infotech Incorporated in 1996, Larsen & Toubro Infotech, a subsidiary of Larsen & Toubro Ltd is Mumbai, India based IT Solutions & Services Company. L&T Infotech is ranked 6th largest IT company in India in terms of export revenues and among top 20 IT service provider in the world.
L&T Infotech offers an extensive range of IT services in diverse industries around the world. The services offered by L&T Infotech include application development, maintenance and outsourcing, enterprise solutions, infrastructure management services, testing, digital solutions and platform-based solutions.
L&T Infotech is promoted by Larsen & Toubro Limited, a leading Indian conglomerate in engineering, construction, manufacturing, finance and technology. For L&T Infotech, the percentage of its revenue from North America, Europe, Asia Pacific and the rest of the world amounted to 68.6%, 17.9%, 2.4% and 6.9%, for Financial Year 2015.
The company is coming out with a maiden public offer of 17500000 equity share of Re. 1 each via book building route for listing benefits. The price band for the offer is Rs. 705 – Rs. 710. Thus the company hopes to mobilize Rs. 1233.75 cr. to Rs. 1242.50 cr. based on lower and upper price band. The company is offering a special discount t of Rs. 10 per share to retail investors. The offer constitutes 10.30 per cent of the post offer paid up equity capital of the company. Minimum application is to be made for 20 shares and in multiples thereon, thereafter. Issue opens for subscription on 11.07.16 and will close on 13.07.16. Post allotment, shares will be listed on BSE and NSE. BRLMs’ to the offer are Citigroup Global Markets India Pvt Ltd, Kotak Mahindra Capital Co. Ltd and ICICI Securities Ltd. Link Intime India Pvt Ltd is the registrar to the issue. Since this IPO is made as offer for sale, its paid up equity remains same at Rs. 16.98 crore. Average cost per share of promoters is Rs. 8.33.
Competitive strengths of the company are as following:
- Strong domain focus enabling Business-to-IT Connect
- Strong parentage and brand equity of our Promoter
- Established long-term relationships with our clients
- Extensive portfolio of IT services and solutions
- Focus on emerging technologies
- Track record of established processes and executing large, end-to-end, mission critical projects
- Strong management culture
- Conducive work environment to attract and retain talent
Company Promoters:
The Promoter of the Company is Larsen & Toubro Limited. L&T currently holds 161,250,000 Equity Shares, equivalent to 94.96% of the pre-Offer issued, subscribed and paid-up Equity Share capital of L&T Infotech.
Company Financials:
| Particulars | For the year/period ended (in Rs. Million) | ||||
| 31-Mar-16 | 31-Mar-15 | 31-Mar-14 | 31-Mar-13 | 31-Mar-12 | |
| Total Assets | 32,380.30 | 29,068.71 | 25,058.09 | 21,893.69 | 19,814.75 |
| Total Revenue | 59,081.26 | 48,331.83 | 45,628.48 | 36,301.56 | 29,685.54 |
| Profit After Tax (PAT) | 9,381.31 | 7,735.97 | 9,032.57 | 5,599.83 | 4,059.27 |
Objects of the Issue:
The objects of the offer are to:
- Achieve the benefits of listing the Equity Shares on the Stock Exchanges; and
- Carry out the sale of up to 17,500,000 Equity Shares by the Selling Shareholder.
Issue Detail:
- Issue Open: Jul 11, 2016 – Jul 13, 2016
- Issue Type: Book Built Issue IPO
- Issue Size:17,500,000 Equity Shares of Rs 1 aggregating up to Rs 1,400.00 Cr
› Fresh Issue of 0 Equity Shares of Rs 1 aggregating up to Rs [.] Cr
› Offer for Sale of 17,500,000 Equity Shares of Rs 1 aggregating up to Rs [.] Cr
- Face Value: Rs 1 Per Equity Share
- Issue Price: Rs. 705 – Rs. 710 Per Equity Share
- Market Lot: 20 Shares
- Minimum Order Quantity: 20 Shares
- Listing At: BSE, NSE
Rs 10 Discount to Retail Individual Bidders
L&T Infotech Ltd offers discount of Rs 10 to all eligible Retail Individual Bidders.
Strengths
Strong parent and brand equity of the promoter. The company benefits from the strong domain expertise, understanding and experience of the L&T group in verticals such as hydrocarbons, heavy engineering, oil and gas, automotive, aerospace etc, which assists LTIL in developing and delivering IT services and solutions that benefit clients in these verticals and differentiates the company from its competitors.
L&T Infotech’s constant currency dollar revenue growth in FY 2016 stood at 13.8%. The company has been delivering resilient growth in the face of a sharp decline in revenues from the energy & processes vertical, where IT spending was hit by the dramatic fall in crude prices. The share of this vertical has fallen from 22% in FY 2014 to 12.7% in FY 2016. This headwind was mitigated by strong growth in large accounts (including the top client) within BFSI, retail, CPG &pharma and auto & aerospace verticals.
The company’s track record of delivering an extensive range of solutions using global delivery model, demonstrable industry, and technology expertise, and sensitivity to its clients’ feedback, has helped it to forge strong relationships with major clients and helps in deriving repeat orders.
With only around 2% exposure to the UK market, LTIL would be least impacted by any near-term growth volatility caused by Brexit.
Digital services revenue, which is an emerging stream of service, witnessed more than 30% CAGR in FY 2013-16 and now contributes around 11% of its total revenues as compared to only around 5% 4 years back.
Weaknesses
In FY 2016 and 2015, around 69.0% and 68.6%, respectively, of LTIL’s revenue from continuing operations were derived from its North America segment. Any economic uncertainty or adverse change in laws/regulations in the USA can adversely affect its fortunes.
For FY 2016, the largest client accounted for around 14.9% of total revenues and top 10 largest clients accounted for around 53% of total revenues. The company has about 17 clients who generated above US$ 10 million in revenue, 10 clients who generated above US$ 20 million in revenue and 3 clients who generated above USD 50 million in revenue. Loss of major client or pricing pressure exerted by its top clients or any significant ramp downs by major clients could affect the business and profitability of the company.
Challenges in relation to immigration may affect L&T Infotech’s ability to compete for, and provide services to, clients in the United States and/or other countries, partly because it may be required to hire locals instead of using its existing workforce, which could result in lower profit margins, delays in, or losses of, client engagements and otherwise adversely affects its ability to meet its growth, revenue, and profit projections.
LTIL’s wage costs in India have historically been lower than wage costs in the United States and Europe for comparably skilled employees, and this has been one of its competitive advantages. Wage increases in India may diminish competitive advantage against companies located in the United States and Europe and may reduce the profit margins.
The company has a negligible presence in healthcare domain space and no presence in enterprise resource development (ERD) and engineering services, which are being handled by LTTSL.
The group has anther major company LTTSL in the IT services space, which may lead to a conflict of interest. For the year ended March 2016, LTTSL reported net sales of Rs 2969.40 crore, up by 15% with PAT of Rs 434.20 crore, up by 38%.
Like any other exporter, the company is also exposed to forex volatility and the uncertain global economic environment.
Conclusion:
L&T Infotech company and its performance are good.but issuing high premium price, it’s preferable for long-term investors.
Source : capitaline database
Tradewell Securities Ltd 