Happiest Minds Technologies' IPO Opens: Should You Subscribe?

Experts in the IPO market see Happiest Minds Technologies as the opener to the otherwise gloomy IPO market and there are hopes set that a minimum of 6 more IPOs will kick off by the end of this year.

Now after Rossari Biotech gave immense gains of over 100% to its investors in just a month, here is a lowdown as to whether or not this issue will be any similar for investors in return terms. Here is a lowdown:

Happiest Minds Technologies' IPO Opens Tomorrow: Should You Subscribe Or Not?

1. Issue details :

Issue of the Bengaluru-based mid-scale IT company opens tomorrow and closes on September 9, 2020 will attempt at amassing Rs. 702 crore via issuance of fresh equity worth Rs. 110 crore and the rest will be OFS of up to 35,663,585 equity shares. Of it 8,414,223 shares will be put for stake sale by Soota and another 27,249,362 shares by CMDB II (JP Morgan Asset Management). The company has already raised a total of Rs 315.91 crore from 25 anchor investors.Investor will be able to subscribe to the issue with a minimum lot size of 90 shares.

Issue price for the IPO has been fixed between Rs. 165-166 per share.

 

2. About the company:

The company's service areas comprise Digital Business Services (DBS); Product Engineering Services (PES) and Infrastructure Management & Security Services (IMSS) Ashok Soota, promoter of the company, was the co-founder of Mindtree. Major revenues for the company come from US-clients.

Issue objective:

Rs. 101 crore shall be put to meet long term working capital requirement and the rest for general corporate purpose

Should You Subscribe Or Not To The Happiest Minds Technologies' Issue?

Market participants view the fundamentals and valuation of the company may offer listing gains to its subscribers. The price of Happiest Minds has been in the range of Rs 108-130 (per share) since the announcement of the IPO," said Divam Sharma, Co-founder at Green Portfolio a SEBI Registered Portfolio Management Services company, as he discussed the grey market performance of Happiest Minds. Also, he suggest that listing gains of more than Rs. 100 per share can be expected from the issue. The company's repeat business from existing client base has been high, he added.

Choice Broking gives a ‘Subscribe' call to the issue:

"At the higher price band, the issue seems to be fully priced as compared to its domestic peers. Happiest Minds earned an average 97.1% of the revenue from digital IT services as compared to its domestic peers, which earned in the range of 30-50%. Thus the company cannot be fully comparable to the domestic peers," said brokerage and research firm Choice Broking while giving a ‘subscribe' call to the issue.

"We believe Happiest Minds IPO offer gives investor a unique opportunity to own a digital product engineering company. We see digital engineering business is growing much faster than traditional IT business and it is well positioned to overcome the business challenges due to the COVID-19 pandemic with high exposure into 'edutech' and 'high tech' verticals which have grown faster during the pandemic and enabling the company to grow at around 20 percent YoY whereas the industry has slowed down to around 8-10 percent," said Prashanth Tapse, AVP Research at Mehta Group who advised investors to subscribe to this offer.

Also ahead of its issue, the counter in the pre-IPO market or grey market commanded a premium of over 60% in comparison to its issue price.

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Financials

For the June quarter, the company reported a net profit of Rs 50.2 crore and a revenue of Rs 177 crore. Revenue from operations increased 22.8 per cent compounded annually during the same period to Rs 698.21 crore. The company's leading 10 clients account for 48 per cent of revenues, with the top client alone contributing 12 per cent of its revenue.