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Happiest Minds IPO day 2: Issue subscribed 8.4 times, retail portion at 39 times

Ajcon Global believes the issue is priced at a premium owing to its robust business model and major presence in Digital IT space.

September 08, 2020 / 06:54 PM IST

The Rs 702-crore initial public offering of Bengaluru-based mid-sized digital IT company Happiest Minds Technologies continues to see strong subscription on the second day of bidding, September 8.

The public issue has received bids for 19.53 crore equity shares against IPO size (excluding anchor book) of 2.3 crore equity shares and as a result, the offer witnessed 8.4 times subscription, the data available on the exchanges showed.

Retail investors maintained their tempo by investing a huge sum of money in the issue as their portion set aside has been subscribed over 38.85 times. The reserved portion of non-institutional investors saw 3.96 times subscription and that of qualified institutional investors 46.7 percent.

The public issue, which will close on September 9, consists a fresh issue of Rs 110 crore and an offer for sale of 3,56,63,585 equity shares by promoter Ashok Soota and JP Morgan-backed private equity fund CMDB II.

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The issue price band has been fixed at Rs 165-166 per share.

"At the upper end of the price band of Rs 166, the issue is valued at a P/E of 27x at FY20 EPS at Pre-IPO and at a P/E of 34x on post IPO EPS of Rs 4.88. We believe the issue is priced at a premium owing to its robust business model and major presence in Digital IT space. The recent fancy for companies with differentiated business model instills confidence on this issue. The international peers which have a similar businesses model are trading at a P/E valuation of around 65x," said Ajcon Global report made by Akash Jain, MBA (Financial Markets), Vice – President Research, which recommended subscribing the issue for listing gains.

Happiest Minds Technologies IPO: 10 key things that you should know

The brokerage likes the company due to the following factors: a) strong brand in Digital IT services with 97 percent revenues coming from high margin digital space as compared to peers deriving 35-50 percent, b) the global digital services market of $691 billion in 2019 is expected to grow at a CAGR of 20.2 percent to $2 trillion, c) growing high revenue generating customer accounts with a high proportion of repeat revenues and revenues from mature markets," said Ajcon Global report made by Akash Jain, MBA (Financial Markets), Vice – President Research.

The brokerage also cited more strong reasons for its recommendation - Scalable business model with multiple drivers of steady growth; end to end capabilities spanning the digital lifecycle from roadmap to deployment and maintenance; strong R&D capability; agile engineering and delivery; strong promoter - Ashok Soota (erstwhile co-founder of Mindtree); and improved financial performance.

Happiest Minds IPO to open on September 7: Should you subscribe?

Happiest Minds' business is divided into three business units viz. 1) Digital Business processing 2) Product Engineering Services and 3) Infrastructure management and security services.

The company has already raised Rs 316 crore from 25 anchor investors, including the Government of Singapore, Goldman Sachs, Kuwait Investment Authority, Nomura Funds Ireland, Jupiter India etc.

The company proposed to utilise the net proceeds from the fresh issue towards long term working capital requirement and general corporate purposes.

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Moneycontrol News
first published: Sep 8, 2020 12:13 pm
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