Latent View IPO review (Apply)

•    LVAL has created a niche place in data analytics services globally.
•    It caters to Fortune 500 companies with long term relationships.
•    The company was able to maintain healthy margins on its contracts.
•    LVAL may generate first-mover fancy post listing.

ABOUT COMPANY:
Latent View Analytics Ltd. (LVAL) is the leading pure-play data analytics services company in India (Source: Zinnov Report), based on the expertise of the entire value chain of data analytics from data and analytics consulting to business analytics and insights, advanced predictive analytics, data engineering and digital solutions. Across industries, data and analytics are being leveraged by enterprises to guide business strategy and optimize spending decisions amid growing financial uncertainties. (Source: Zinnov Report). LVAL engages and provides services to blue-chip companies in Technology, BFSI, CPG & Retail, Industrials and other industries. It has emerged as one of the most trusted partners to several Fortune 500 companies in recent years (Source: Zinnov Report), and have worked with over 30 Fortune 500 companies in the last three Fiscals. Some of the key clients that it works with include Adobe, Uber Technology and 7-Eleven.

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 sales offices in San Jose, London and Singapore. Revenue is disaggregated primarily by geographical markets and reviewed by management accordingly. It provides services primarily to companies in Technology, CPG and Retail, Industrials, and BFSI industries.

LVAL designs and engineers result-oriented analytics solutions for clients across industries, that enable them to operate more efficiently by predicting outcomes that fuel digital transformation and sustainability. Its expertise in business analytics includes analytics with respect to customer profiling, targeted marketing, supply chain management, finance and risk management, and HR functions. The company provides these services on the back of the expertise and understanding it has developed of various AI/ML algorithms that power digital analytics implementations.

LVAL's scope of work is classified into 1. Consulting services, that involves understanding relevant business trends, challenges, and opportunities and preparing a roadmap of data and analytics initiatives that addresses them; 2. Data engineering, which is undertaken to design, architect and implement the data foundation required to undertake analytics; 3. Business analytics, which delivers analysis and insights for clients to make more accurate, timely and impactful decisions; and 4. Digital solutions that it develops to automate business processes, predict trends, and generate actionable insights.

ISSUE DETAILS/CAPITAL HISTORY:
To part finance its plans for funding inorganic growth (Rs. 147.90 cr.), working capital needs for subsidiary (Rs. 82.40 cr.), investments in subsidiaries (Rs. 130.00 cr.) and general corporate purpose, the company is coming out with a maiden IPO of (approx. 30456848 shares) equity shares having a face value of Re. 1 per share to mobilize Rs. 600 cr. The issue comprises of fresh equity issue worth Rs. 474 cr.  (24060916 shares) and an offer for sale (OFS) of Rs. 126 cr. (6395932 shares). The issue opens for subscription on November 10, 2021, and will close on November 12, 2021. LVAL has fixed a price band of Rs. 190 - Rs. 197 per share and minimum application is to be made for 76 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 15.40% of the post issue paid-up capital of the company. The company has reserved shares worth Rs. 6 cr. for its eligible employees and offering them a discount of Rs.19 per share. From the residual portion, LVAL has allocated 75% for QIBs, 15% for HNIs and 10% for the Retail investors.

Joint Book Running Lead Managers (BRLMs) to this issue are Axis Capital Ltd., ICICI Securities Ltd. and Haitong Securities India Pvt. Ltd. while Link Intime India Pvt. Ltd. is the registrar to the issue. 

Having issued initial equity at par, the company raised further equity at a fixed price of Rs. 132 per share (FV Re. 1) and has also issued bonus shares in the ratio of 15 for 1 in May 2010 and 20 for 1 in August 2021. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. NIL, Rs. 0.001, Rs. 0.004, Rs. 2.38, Rs. 6.29 per share.

Post issue, LVAL's current paid-up equity capital of Rs. 17.37 cr. will stand enhanced to Rs. 19.78 cr. Based on the upper price band of the issue, the company is looking for a market cap of Rs. 3896.30 cr.  

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, LVAL has (on a consolidated basis) posted turnover/net profit of Rs. 295.90 cr. / Rs. 59.67 cr. (FY19), Rs. 329.67 cr. / Rs. 72.85 cr. (FY20) and Rs. 326.71 cr. / Rs. 91.46 cr. (FY21). For the first three months of FY22 ended on June 30, 2021, it has earned a net profit of Rs. 22.31 cr. on a turnover of Rs. 91.74 cr. 

For the last three fiscals, the company has posted an average EPS of Rs. 4.42 (diluted basis) and an average RoNW of 21.15%. The issue is priced at a P/BV of 7.29 based on its NAV of Rs. 27.02 as of June 30, 2021, and at a P/BV of 4.16 based on its post-issue NAV of Rs.47.33 (at the upper cap).

If we annualize FY22 earnings and attribute it on fully diluted post issue equity, then the asking price is at a P/E of around 43.68 thus making it a fully priced issue. Based on FY21 earnings, its P/E stands at 42.64.

COMPARISON WITH LISTED PEERS:
As per the offer document, LVAL has shown Happiest Minds Techno as its listed peer. It is currently trading at a P/E of around 111.37 (as of November 03, 2021). However, they are not truly comparable on an apple to apple basis. 

DIVIDEND POLICY:
The company has not declared any dividend in the last three fiscals and till the filing of this RHP. It will adopt a prudent dividend policy post listing based on its financial performance and future prospects.
 
MERCHANT BANKER'S TRACK RECORDS:
The three BRLMs associated with this issue have handled 44 public issues in the past three years, out of which 16 issues closed below the offer price on the listing date.