Data analytics company Latent View Analytics shares rose as much as 179 percent on November 23, the first day of trade on the bourses, exceeding analysts' expectations and in line with the grey market premium. It rejuvenated the sentiment on the Street, which was hit by Paytm's disappointing listing.
Analysts had expected it to list at more than twice the issue price, while the grey market premium was around 178 percent.
Most analysts advised to hold the stock for a longer term to get healthy returns given the strong sector growth potential, quality corporate governance practices, strong client base and healthy margins, but said short term investors can book profits either fully or partially.
Latent View Analytics shares opened at Rs 530 on the BSE, up 169 percent from the issue price. The stock went up to Rs 548.75 intraday, up 179 percent. At 12:34 hours IST, it was trading at Rs 488, up 147.72 percent with volume of 15.83 lakh shares. On the NSE, it was quoting at Rs 491.2, up 149 percent with volume of 2.23 crore equity shares.
It was trading at a market capitalisation of Rs 9,704 crore.
"It is another stellar listing after a disappointment from Paytm that indicates the market is ready and has an appetite to reward quality IPOs. The Latent view is a data analytics company and this industry is likely to grow by 18-20 percent for the next 3 years," says Santosh Meena, Head of Research at Swastika Investmart.
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Moreover, it will be the only listed company in this space in the country, and boasts an experienced management and quality corporate governance practices, he said. "It has a strong client base from Fortune 500, but there is concentration risk because 55 percent of its revenue comes from the top 5 clients. Revenue growth has been muted for this company. However, it has a strong margin with more than 20 percent return on equity."
The valuations look expensive after a strong listing, but the overall outlook is bullish, he says, adding that long-term investors should hold the company in their portfolio.
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Sonam Srivastava, Founder of Wright Research also recommended investors to hold the stock for the long term. "Much like the much sought-after e-commerce and fintech plays, data analytics and predictive analytics is the most sought-after sector among innovators in the next decade, and Latent View has exposure to global clients," she said.
Drawing parallels with Happiest Minds, Srivastava said Latent View has enormous potential with its existing strong client and revenue base and presence in the global analytics and predictions industry.
The company engages in the entire value chain — from data and analytics consulting to business analytics and insights, advanced predictive analytics, data engineering and digital solutions to blue chip companies in technology, BFSI, CPG & retail, industrials and others.
Technology segment contributed 63 percent to its total revenue in FY21, whereas industrials accounted for 17.54 percent, and BFSI and CPG & Retail were at 9.6 percent each.
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The company received maximum business from the United States, which contributed 92.88 percent to total revenue from operations, and 1.85% came from the United Kingdom in FY21.
Consolidated profit in the year ended March 2021 surged to Rs 91.46 crore, up more than 25 percent compared to Rs 72.84 crore in the previous year, though revenue fell moderately to Rs 305.88 crore from Rs 310.35 crore in the same period.
Consolidated profit for the June 2021 quarter at Rs 22.31 crore declined slightly from Rs 22.8 crore in Q1FY21, while revenue grew 20.3 percent to Rs 87.83 crore from Rs 73.02 crore.
"We advise allotted investors to partially book 50 percent profits considering bumper listing and hold rest for medium term play as the market always rewards a player who has the high growth potential and can create wealth for its shareholder in the future," said Prashanth Tapse, VP Research at Mehta Equities.
However, Divam Sharma, Co-founder of Green Portfolio believes the company is valued on the higher side and hence advised that investors should exit with listing gains.
"Although we like the analytics space in general, some of the reasons why we are not so bullish in the long run are 1) Acquisition-led growth strategy doesn't excite us for factors like sustainability. We are always more interested in organic led growth strategies, 2) revenue has been almost flat in an otherwise fast growing market and that's true to the other large analytics company called Musigma," Sharma reasoned.
Latent View Analytics raised Rs 600 crore through its public issue. The offer comprised a fresh issue of Rs 474 crore and an offer for sale of Rs 126 crore.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.