Current IPO: L&T Infotech-for Long term Investors

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:

  1. Strong domain focus enabling Business-to-IT Connect
  2. Strong parentage and brand equity of our Promoter
  3. Established long-term relationships with our clients
  4. Extensive portfolio of IT services and solutions
  5. Focus on emerging technologies
  6. Track record of established processes and executing large, end-to-end, mission critical projects
  7. Strong management culture
  8. 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:

  1. Achieve the benefits of listing the Equity Shares on the Stock Exchanges; and
  2. 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

 

BRICS GDP: Crisis of Confidence?

BRICS GDP in 2016 is nearing a crisis of Confidence from the earlier heydays of 2012 with #Brazil #Russia #India #China #SouthAfrica showing signs of tiredness

Gross Domestic Product (GDP) is the broadest quantitative measure of a nation’s total economic activity. More specifically, GDP represents the monetary of all goods and services produced within a nation’s geographic borders over a specified period of time.

The Equation used to calculate GDP is as follows:

GDP= Consumption+Government Expenditures+Investments+Exports-Imports

Why it’s Important

When GDP declines for two consecutive quarters or more, by definition the economy is in a recession. Meanwhile, when GDP grows too quickly and fears of inflation arise, the Reserve Bank often attempts to stimulate the economy by raising interest rates.

Binoculars.

Global Growth & Forecast

Global growth, currently estimated at 3.1 % in 2015, is projected at 3.4 percent in 2016 and 3.6 percent in 2017. The pickup in global activity is projected to be more gradual than October 2015 as per  World Economic Outlook (WEO), especially in emerging market and developing economies.

Risks to the global outlook remain tilted to the downside and relate to ongoing adjustments in the global economy: a generalized slowdown in emerging market economies, China’s rebalancing, lower commodity prices, and the gradual exit from extraordinarily accommodative monetary conditions in the United States. If these key challenges are not successfully managed, global growth could be derailed.

 

BRICS NATION’S GDP

BRAZIL: There is a phenomenal increase in the size of GDP over past decade in Brazilian economy from $ 892 bn in 2005 to $ 2.39 tn in 2013 with service sector output @70% in 2013. This concludes that Brazilian economy is driven by the service sector.

RUSSIA: Based on data from World Bank it can be easily said that Russian economy is service sector driven economy as the service sector shares 59.78 % of GDP which is 5% increase when compared  to output from 2005 while other sectors like Agriculture and Manufacturing decreased by approxmatly 20%. The size of the economy also decreased by 79% when compared to 2005. Total size of GDP at $ 1.34 tn in 2013.

INDIA: As we all know that India is a developing economy, it was once an Agricultural economy where Agricultural sector was a major contributor to GDP. Now as the world became a global market, India too started contributing to it with new found strength in service sector. It soon became a service economy with contributing 51% of GDP in the year 2013. However, there is an increase in 123% in GDP size while a decrease in growth rate by 26% when compared to 2005 growth rate.

CHINA: Chinese economy is a faster-growing economy with most of its strength in Manufacturing and service sector contributing 31% and 47% of GDP respectively. Its GDP size increased  by 3 times over the past decade. However, like Indian economic growth rate, Chinese economy also decreased from 11.35% in 2005 to 7.68 in 2013 total decrease of 32%.

BRICS REACH 30 PERCENT OF GLOBAL GDP

The share of BRICS countries in global GDP has reached 30 percent as per Russian Minister of Economic Development- Alexei Ulyukayev, who said at the Meeting of the BRICS Trade Ministers in Moscow. Trade between the BRICS countries in 2014 was up more than 70 percent to USD 291 billion, he pointed out.

Our countries accounted for over 17 percent of global trade, 13 percent of the global services market and 45 percent of the world’s Agricultural output in 2014 “Mr Ulyukayev noted, adding that the combined GDP of the BRICS countries surged from USD 10 trillion in 2001 to USD 32.5 trillion in 2014.

gdpgr

 

GDP ANNUAL GROWTH RATE(%) FROM 2005-2014
COUNTRIES 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
BRAZIL 3.1 4 6 5 -0.2 7.6 3.9 1.8 2.7 0.1
CHINA 11.4 12.7 14.2 9.6 9.2 10.6 9.5 7.8 7.7 7.4
INDIA 9.3 9.3 9.8 3.9 8.5 10.3 6.6 5.1 6.9 7.4
RUSSIA 6.4 8.5 8.2 5.2 -7.8 4.5 4.3 3.4 1.3 0.6
SOUTH AFRICA 5.3 5.6 5.4 3.2 -1.5 3 3.2 2.2 2.2 1.5

Source:worldbank data