L&T Tech IPO subscribed 2.5 times

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The Rs 890-crore initial public offering (IPO) of L&T Techno-logy Services’ equity has garnered a subscription of only 2.5 times what was offered.

The 7.28-million share offering received bids for 18 million shares. Engineering giant Larsen & Tourbo (L&T) sold around 11 per cent stake in the company through the IPO, for Rs 890 crore. The price band for the issue was Rs 850-860 a share.

The demand for L&T Tech was tepid compared to other recent IPOs. Market players said investors stayed away as they lost money on L&T Infotech, another L&T group firm, which had an IPO in July.

The bulk of the L&T Tech subscription came from institutional investors, which bid for 10.4 million shares against the two million on offer. The institutional book was subscribed a little more than five times but the high net worth individual (HNI) segment was subscribed a little over once only. The retail book (small investors) was subscribed 1.6 times. Ahead of the IPO, the company had raised Rs 268 crore from anchor investors DSP BlackRock, Vanguard Emerging Markets Fund, Copthall Mauritius Investment and ICICI Prudential Life Insurance.

Kotak Mahindra Capital, DSP Merrill Lynch, JM Financial and SBI Caps were lead managers for the issue.

“While there are no strictly comparable peers listed, large IT companies, high growth mid-sized IT companies and engineering-focused niche players form a decent set for valuation comparison. The price band of Rs 850-860 implies a 21 times FY16 price to earnings ratio (per reported numbers). This is at a premium to the peer set,” Credit Suisse had said.

L&T Tech is among the largest purely engineering service companies in India, with revenue of Rs 3,000 crore in FY16.