L&T Infotech makes tepid debut

This is in contrast to its Rs 1,243-crore initial public offering (IPO) performance, which saw the shares being oversubscribed 11 times last week

Larsen and Tourbo’s (L&T’s) information technology arm, L&T Infotech, made a lukewarm stock market debut on Thursday, with its shares dropping a little over six per cent from its initial public offer (IPO) price.

The shares ended at Rs 697 on the BSE exchange, down Rs 13 or 1.8 per cent from the issue price of Rs 710. It touched a low of Rs 666 before recovering, despite weakness in the secondary market. The benchmark Sensex ended 0.7 per cent lower, while the BSE IT index ended 0.1 per cent lower.

Market players said a primary reason for the lacklustre debut was a weaker outlook for the sector, after disappointing results and forecasts by Infosys, Wipro and Mindtree.

“The weak IT results have had a bearing on L&T Infotech. Events such as Brexit (the British vote to leave the European Union) have also weighed on the industry. The overall outlook isn’t good. This has also reflected in the first quarter results,” said Ashish Chopra, vice-president, technology and e-commerce research, Motilal Oswal Securities.

Since the Brexit referendum on June 23, the BSE IT index has declined 5.5 per cent, as against an increase of five per cent in the Sensex.

“I don’t see any trigger for the stock to move up in future. It is fairly valued,” said Chopra.

The weak debut comes despite L&T Infotech’s Rs 1,200 crore IPO garnering over 10 times subscription last week. It had been originally expected to list at a 10 per cent premium, said market players.

In the past week, the shares of Infosys have declined nearly 10 per cent and of mid-sized Mindtree by 13 per cent.

At Thursday’s closing price, L&T Info has a market capitalisation of Rs 11,850 crore. It is the country’s seventh largest IT services entity in revenue terms, with a focus on banking, financial services & insurance and energy sectors.

After the IPO, parent L&T’s stake has declined from 94.94 per cent to 84.64 per cent. L&T will have to dilute further to reduce its stake to at least 75 per cent in the next three years, to comply with the minimum public shareholding norms.