Latent View sees bumper debut, lists at 169% premium against issue price

The shares of Latent View Analytics listed at Rs 530 per share on the BSE, a 169 per cent premium against the issue price of Rs 197 per share.

Latent View Analytics made a strong market debut on the bourses on Tuesday despite a weakness in the secondary market. The shares listed at Rs 530 per share on the BSE, a 169 per cent premium against the issue price of Rs 197 per share. On the National Stock Exchange (NSE), the shares debuted at Rs 512, up 160 per cent against issue price. 

The stock, however, witnessed mild profit booking at higher levels but continued to trade significantly higher than the issue price. At 10:20 AM, it quoted at Rs 498 apiece, still up 153 per cent against the issue price. A combined 16.71 million shares had changed hands on the NSE and BSE till the time of writing of this report.

Data analytics firm Latent View Analytics' maiden offering had garnered 339 times subscription, making it the most-subscribed initial public offering (IPO) ever. The total bids exceeded Rs 1.1 trillion—nearly six times more than what the country's largest IPO, that of Paytm, received.

The high networth individual (HNI) portion of the IPO garnered nearly 882x subscription with bids totalling Rs 78,498 crore. Retail portion was subscribed 124x and the institutional investor portion saw over 150x subscription. The price band for the IPO has been set at Rs 190-197 per share.

The firm is among the leading pure-play data analytics services companies in the country. The company functions in areas such as consulting services, data engineering, business analytics and digital solutions.

The company serves clients across countries in the United States, Europe, and Asia through its subsidiaries in the United States, Netherlands, Germany, United Kingdom, and Singapore, and its sales offices in San Jose, London, and Singapore.

Proceeds from the fresh issue will be used for funding inorganic growth initiatives, working capital requirements of the subsidiary Latent View Analytics Corporation, and investment in subsidiaries to augment their capital base for future growth and general corporate purposes.

Analysts said investors were attracted to Latent View's valuation discount to Happiest Minds, which operates in a similar space.

"The issue is priced at a price-to-book value of 7.3 times based on its NAV (net asset value) of Rs 27 as of June 30. The company has a healthy margin profile with three-year average return on net worth of 21.15 per cent. Considering the company's plan for inorganic growth, longstanding relationship with some of the Fortune 500 companies, its leadership position in the industry, we recommend a 'subscribe' rating to this IPO," said a note by Anand Rathi.

That said, historically, Latent View Analytics has entered into long-term partnerships with a few of its key clients, which has resulted in a limited number of clients accounting for a substantial portion of its revenue. If its existing clients do not renew their contracts with it, or expand the scope of services it provides to them, or if it’s long-term relationships with its largest clients are impaired or terminated, its revenue could decline, and its results of operations would be adversely impacted, caution analysts.

"Revenues are highly dependent on a limited number of industry verticals, and any decrease in demand for outsourced services in these industry verticals could reduce its revenues and materially adversely affect the business, financial condition and results of operations, are among key concerns," HDFC Securities said in IPO note.

Road ahead

Given the stock's solid listing pop, analysts now advise short-term investors to partially book profit even as long-term investors can hold the stock. Those looking to buy the stock now should wait for a correction, they say.

"Data analytics industry is likely to grow by 18-20 per cent for the next three years. The strong part of the company is that it will be one of its kind listed company, with experienced management, and quality corporate governance practices. Though it has a strong client base from fortune 500, there is concentration risk as 55 per cent of its revenue comes from the top 5 clients. Revenue growth has been muted, however, it has a strong margin with over 20 per cent ROE. The overall outlook is bullish but valuations look expensive after a strong listing. Long-term investors should hold on to the stock, while those who played for listing gain should keep a stop loss at 490," said Santosh Meena, head of research, Swastika Investmart.

For Parth Nyati, founder of Tradingo, investors who got the allotment can put a stop loss of Rs 450 and hold the stock with a long-term view, while the new investors should look for a dip to buy the stock.