L&T Tech lists at 7% premium, trims gains to end 1% higher

Demand for L&T Tech was tepid, as investors stayed away, having lost money on group concern L&T Infotech

Shares of L&T Technology Services listed at Rs 920 on the National Stock Exchange (NSE), a seven per cent premium over its issue price of Rs 860 a share. The stock hit an intraday high of Rs 931.4 before slipping to close at Rs 869, a gain of one per cent.

Another L&T group company, L&T Infotech, had listed at a discount to its issue price earlier this year. The firm’s Rs 1,243-crore initial public offering (IPO) was oversubscribed nearly 12 times but its shares had listed at a 1.7 per cent discount to the issue price.

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, which hit the market with an IPO in July.

“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 in a recent note.

Overall, the Rs 890-crore IPO of L&T Technology Services was oversubscribed 2.5 times. 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, while the high net worth individual segment was subscribed one time. Retail investors’ quota was subscribed 1.7 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 to the issue.

The company provides engineering, research and development services to manufacturing, technology and process engineering companies. It operates in five industry segments – transportation, industrial products, telecom and hi-tech, process industry and medical devices.

L&T Tech is the 17th company to list this year on the bourses. Of these 17 companies, 11 have given double-digit returns on listing day, while four ended in the red. Together, these companies have raised Rs 12,700 crore.