Happiest Minds Technologies, a small-sized IT services company promoted by Ashok Soota, is set to debut on bourses on September 17 after its Rs 702-crore IPO issue last week.
The company has fixed final issue price at Rs 166 per share, the upper end of price band of Rs 165-166.
Given the hefty subscription figures for its IPO, strong management led by ex-co-promoter of Mindtree, Ashok Soota, and sound fundamental report card, Happiest is expected to list with a bumper premium over its issue price, experts feel.
According to experts, the listing premium could be in the range of 50 percent to 94 percent above the final issue price.
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The public issue witnessed a subscription of 150.98 times, the 8th highest subscription figure in a decade, during September 7-9. The strong response was across segments of investors with reserved portion of qualified institutional buyers subscribing 77.42 times, non-institutional investors 351.45 times and retail 70.94 times.
"The Company commands over 97 percent of the revenues from digital IT business which is highest amongst the other Indian listed IT firms. Founded by Ashok Soota, well-known name in the IT industry, signals strong corporate governance. Therefore, we expect bumper listing for the stock. It should list at a premium around Rs 125-160 over the issue price. Hence, listing should be around Rs 291-326 per share," Manali Bhatia, Head of Research at Rudra Shares & Stock Brokers told Moneycontrol.
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Prashanth Tapse, AVP Research at Mehta Equities also feels considering overwhelming investors response to Happiest Minds' IPO, the subscription demand indicates the listing could be with hefty premium around 65-75 percent to issue price.
He believes that digital engineering business is growing much faster than traditional IT business and Happiest Minds is well positioned 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. "Overall, we remain optimistic on Happiest Minds for medium to long term play."
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The IT company offers digital business, product engineering, infrastructure management and security services among others. It had 148 active customers as of Q1FY2021 with the share of repeat business growing consistently over the year to account for a significant portion of revenues indicating a high degree of customer stickiness.
The United States, historically, has contributed a majority (77.50 percent) of its revenues, which increased from 73.50 percent in FY18, while India business contributed 11.90 percent to total revenue in FY20 and UK 7.2 percent.
Happiest Minds reported profit of Rs 50.2 crore in Q1FY21 against Rs 71.7 crore in FY20, led by higher other income. Its revenue was flat in Q1 YoY on account of COVID-19 related challenges, but the company reported a significant improvement in its EBITDA margin at 21.4 percent against FY20 margin of 13.9 percent.
On the back of higher volume of projects executed over FY18-20, Happiest Minds reported a 22.8 percent CAGR rise in consolidated revenue and higher utilization of work forces led to an EBITDA profit of Rs 54.83 crore and Rs 97.1 crore in FY19 and FY20, respectively, as compared to an EBITDA loss of Rs 18.61 crore in FY18. Adjusted PAT stood at a loss of Rs 22.47 crore in FY18, while it remained in green and stood at Rs 26.79 crore in FY19 and Rs 82.97 crore in FY20.
The company had a positive operating cash flow over FY18-20, which increased by 229.4 percent CAGR to Rs 112.22 crore in FY20. "We feel that Happiest Minds has gained business momentum and thus is forecasted to report improved operating and financial performance in the mid-term," said Choice Broking which expects a 14.6 percent CAGR rise in topline over FY20-23, EBITDA 22.1 percent and PAT 17.9 percent.
Astha Jain, Senior Research Analyst at Hem Securities expects Happiest to list at premium of 50-60 percent above issue price.
"Company has shown strong growth in its financials in last couple of years. Company is strong brand in digital IT services with growing high revenue generating customer accounts with a high proportion of repeat revenues and revenues from mature markets," said Astha Jain who likes company's scalable business model which has multiple drivers of steady growth with experienced leadership focused on sound corporate governance practices.
Happiest Mind is founded by Ashok Soota who is also the Executive Chairman and Director of the company. Before founding Happiest Minds in 2011, Soota was one of the founding members of Mindtree prior to which he was also the Vice Chairman of Wipro.Disclaimer: The views and investment tips expressed by investment expert on Moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.