L&T Infotech subscribed 11 times on the closing day

Company's 12.25 mn share offering attracted 132 mn bids from various investors as per exchange data

Continuing with the trend of successful initial public offering (IPO), Larsen & Toubro's IT arm- L&T Infotech IPO saw a decent subscription on its final day of offer. The Rs 1,236 crore IPO was oversubscribed nearly 11 times on the closing day as per provisional data.

The company's 12.25 million share offering attracted 132 million bids from various investors as per the exchange data. The bulk of the bids have come from the Qualified Institutional Buyers (QIB). The QIB as a category witnessed a whooping interest as it got subscribed 20 times while the high net worth individual (HNI) category got oversubscribed 10.7 times. The retail category investors attracted 7 times of the allotted shares.

V Jayshankar, senior executive director and head of equity capital markets at Kotak Investment Banking said, "L&T Infotech is one of the largest IT services that have come up in the last one decade. Besides, it also got benefitted from the parent brand of L&T."

According to bankers, the IPO attracted nearly one million applications by the third day. Jayshankar says, "This is the highest in last five years."

He also believes that the pricing of the IPO has been one of the prime reasons for the IPO to do well and not just LT Infotech's IPO but other IPOs that have done well in the recent past. "The bankers and issuers have been very pragmatic in terms of pricing the IPOs. That has also attracted investors considering the companies that have gone for IPOs have strong financial track record."

In a note to subscribers, Reliance Securities showed confidence in the IPO. "We believe LTIL with its revenue size, high return ratios and redoubtable parentage should command 10% PE discount to Mindtree on inferior growth, while the IPO price band indicates a much larger discount. Thus, we believe the promoters have left something on the table for the investors in terms of valuations, which we view as a major positive factor in favour of the IPO."

Angel Broking also recommended investors to subscribe. "Assuming that the company maintains its historical average rate of dividend payouts, it would translate into a yield of 4-5% for the investor. Apart from the favorable prospects of the company, we also foresee decent gains on listing."

The company on Friday raised Rs 373 crore from anchor investors by allocating the shares at Rs 710 per equity share. The price band of the IPO was fixed at Rs 705-710.

According to a note from Angel broking, L&T Infotech, one of the leading IT companies, has posted a 20.1% CAGR between 2011- 2015.

Jayshankar is confident that when the company will debut in the secondary market, it will see a heightened demand.

L&T Infotech, established in 1996, is 100% owned by L&T group. However, post the IPO, L&T's stake in the company would drop to 84.5%. Shares of L&T, the parent company, however, dropped 1.2 per cent on the BSE on Wednesday.