L&T Infotech IPO: Should You Subscribe To The Offer?

Published: Monday, July 11, 2016, 9:04 [IST]

The one good thing about the L&T Infotech IPO is that the stock is slightly better priced in comparison to recent IPOs.

This an offer for sale and the company's main promoters would be gettting Rs 1243 crores from the sale by selling 1.75 crore shares in the price band of Rs 705-710.

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Most brokerages are pretty much neutral on the stock, while not being overly optimistic of solid listing gains. It can be a good long term story, through things change rapidly in the IT business.

There has also been some concerns for growth of these stocks, due to the recent worries over Brexit.

According to Brokerage firm Reliance Securities the L&T Infotech IPO is available at a discount to peers and hence is attractive in terms of valuations.

The firm believes that companies like Mindtree stand to benefit, due to better exposure to digital as compared to L&T infotech.

Brokerage firm IIFL on the other hand believes that one should not expect any substantial gains from the listing of these shares.

"Key risks to growth and margin outlook include a reduction in IT spend by BFSI vertical and top clients," it said.

We found some merits in the arguments for subscribing to the offer.

One is that the offer is priced at a p/e of just 14 times one year forward earnings. This is not very expensive, leaving some potential for at least 10 per cent gains in the next few months.

However, we must admit that it is always very difficult to take a call on which way the IT sector will move.

It is also interesting to note that when L&T Infotech lists, we should have many IT companies like Infosys and TCS already having declared their results for the quarter ending June 30. If the results are good it could lead to decent listing gains for L&T Infotech as well.

GoodReturns.in

Story first published: Monday, July 11, 2016, 9:04 [IST]

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