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Happiest Minds IPO opens today; should you subscribe to the share sale?

Happiest Minds IPO: Price band for the share sale has been fixed at Rs 165-Rs 166 per equity share

Aseem Thapliyal | September 7, 2020 | Updated 10:51 IST
Happiest Minds IPO opens today; should you subscribe to the share sale?
Happiest Minds Technologies plans to raise Rs 702 crore at the upper end of the IPO price band

IT services firm Happiest Minds Technologies will open its initial public offer (IPO) on September 7. Price band for the IPO has been fixed at Rs 165-Rs 166 per equity share. The share sale will end on September 9. The firm will issue fresh shares aggregating up to Rs 110 crore, and an offer for sale of up to 3.56 crore equity shares.

It plans to raise Rs 702 crore at the upper end of the IPO price band. Promoter Ashok Soota will sell 8,414,223 equity shares and private equity fund CMDB-II will offer 27,249,362 shares through the offer-for-sale route.

Application in the IPO can be made in a lot size of 90  equity shares and in multiples of 90 scrips thereafter.

The Bengaluru-based company plans to use the net proceeds from the fresh issue to meet long-term working capital requirement and general corporate purposes.

The shares are proposed to be listed on BSE and NSE. ICICI Securities and Nomura Financial Advisory and Securities (India) are the manager for the offer.

The company filed draft papers with the markets regulator Securities and Exchange Board of India (Sebi) in June approval for the IPO from SEBI on August 21.  

Happiest Minds IPO: Rs 316 crore raised via anchor investors

On Saturday, the IT firm said it received Rs 316 crore from anchor investors ahead of its initial public offering (IPO). Government of Singapore, Goldman Sachs, Kuwait Investment Authority, Nomura Funds Ireland, Jupiter India and Pacific Horizon Investment were some of the anchor investors.

A total of 25 anchor investors were allotted 1,90,30,541 equity shares at the upper price band of Rs 166 per scrip.

Business Today spoke to analysts to find out whether investors should subscribe to the Rs 702-crore IPO. Here's what they said.

Vinod Nair, Head of Research at Geojit Financial Services said, "On the financial front FY18-20 revenue growth stood at 23% on a CAGR basis while profit witnessed a steady growth from Rs 14 crore in FY19 to Rs 72 crore in FY20 due to increase in sales, lower operating expenses and 50% reduction in interest cost in FY20. However, Q1FY21 numbers came flat at Rs 177 cr and on an annualised basis just showing a 1% growth in FY21E.

Happiest Minds IPO opens; here are 7 things to know

As per the management 76% of the business was not impacted by Covid 19 pandemic which is a positive for long term. Based on FY20 EPS, the P/E works out to be 26x which is close to large cap IT players. Given the strong management as Ashok Soota, co founder of Mindtree being the promoter and potential for growth in the digital space post the pandemic era and attractive valuation, we recommend a subscribe rating on the IPO for long-term perspective."

Abhimanyu Sofat, Head of Research at IIFL Securities said, "This is a unique business since 97% of the business is digital as most other similar listed firms are still largely dependent on legacy business. We are quite positive on the future outlook of Happiest Minds considering it trades at a discount to eastern European peers who have a similar profile. Pedigree of Mr. Ashok Soota gives additional strength to the issue."

Yash Gupta, Equity Research Associate, Angel Broking  said, "At the upper end of price band, shares are offered at 23.6 times FY2020 EPS. Considering very high exposure to digital services and strong promoter background, we expect that the company will continue to grow at a faster pace as compared to similar sized companies and therefore should command a premium valuation to the peer group. We would therefore recommend SUBSCRIBE to the IPO."

Abhijeet Ramachandran at Tips2trade said, "Even though very attractively valued in terms of PE for a small cap IT stock and impressive growth in the last 2 years, we would suggest caution for retail investors to subscribe to the Happiest Minds IPO. Investors should wait for another 2 to 3 quarters to see if the growth in earnings is sustainable. This period will also help investors understand whether the company can run smoothly or efficiently as currently valuations seem to be more based on the promoter's track record and goodwill than the earnings growth."

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