Can you tell me the highlights of the IPO of Happiest Minds opening on 07 Sep?
Answer 
Brokerage Ratings on the IPO
Motilal Oswal Securities: Subscribe
The brokerage said that the company's valuations are comparable to larger mid-sized IT companies. It likes the company given its strong presence in digital services, business model with end-to-end capabilities and fast improving financial performance. "Hence, investors can Subscribe to the IPO. Further considering market conditions and bright prospects for IT companies post Covid-era, one may also get listing gains," the brokerage said.
Angel Broking: Subscribe
The brokerage said that given the high exposure to digital services and strong promoter background, the company will continue to grow at a faster pace as compared to similar sized companies and therefore should command a premium valuation to the peer group. "The company had 148 active customers as of Q1FY2021 with the share of repeat business growing consistently over the year to account for a significant portion of revenues indicating a high degree of customer stickiness," it said.
Choice Broking: Subscribe
At the upper end of the price band, the issue seems to be fully priced compared with its domestic peers, the brokerage said. But it noted that the company cannot be fully comparable with the domestic IT peers. "There are international peers, who derive almost all of their revenue from digital services, trading at a P/E multiple ranging from 67-139 times. Assuming the valuations of these companies in the US markets to be frothy, the valuation demanded by Happiest Minds seems to be attractive," it said.
Prabhudas Lilladher: Subscribe
This brokerage says implied P/E multiple for Happiest Minds is 12 times on annualising Q1FY21 EPS. The brokerage has a subscribe rating on the issue as it expects margins expansion, client mining and large deal wins ahead. "Comparatively mid-cap IT services companies listed in the US such as EPAM, Globant and Endava derive 80-90 per cent of their revenues from new technologies, while Indian IT generates ~35-50 per cent and Accenture generates 65-70 per cent. The global digital services market of $691 billion in 2019 to grow at a CAGR of 20.2 per cent to $2 trillion. The legacy IT market as a percentage of total technology spend is also estimated to decline from 85.7 per cent share in 2019 to 65 per cent share by 2025, with digital spend making commanding 35 per cent share by then," the brokerage noted.
Geojit Financial Services: Subscribe
The brokerage is positive on the strong management, given promoter Ashok Soota was co-founder of Mindtree. Besides, the brokerage likes potential for growth in the digital space post the ongoing pandemic and sees valuation as attractive. It has recommended a subscribe rating on the IPO for long term perspective. Hem Securities: Subscribe Astha Jain of Hem Securities said the company is bringing the issue at post-issue PE of 12 times on an annualised Q1FY21 EPS basis. “The company has shown strong growth in its financials in last couple of years. It is strong brand in digital IT services with growing high revenue-generating customer accounts, with a high proportion of repeat revenues and revenues from mature markets .We like the scalable business model of company, which has multiple drivers of steady growth with experience.
SMC Global: 3 stars
This brokerage believes noted that digital is growing much faster than traditional business and that the company has adopted a mindful IT strategy for its future growth. "On the flip side, the company intends to raise Rs 702 crore from the issue, of which Rs 592 crore alone is offer for sale. Considering the P/E valuation on the upper end of the price band of Rs 166, the stock is priced at pre issue P/E of 32.46 times on its actual annualised FY20 EPS of Rs. 5.11. Post issue, the stock is priced at a P/E of 34 times on its EPS of Rs. 4.88. Looking at the P/B ratio at Rs 166 the stock is priced at P/B ratio of 8.77 times on the pre issue book value of Rs.18.92 and on the post issue book value of Rs 25.56 the P/B comes out to 6.50 times," it said.
Source: Economic Times
Since the query is about the highlights of the issue and not about the views of brokers, here are the highlights of the issue of Happiest Minds...
· The IPO opens for subscription on Monday, the 07 September and will close on Wednesday 09 September
· The price band for bidding has been fixed at Rs.165-166 and bides can put their bids in this range or just tick on cut-off and apply
· The approximate issue size of the issue will be around Rs. 702 crore at an issue price of Rs.166 per share
· The IPO will be a mix of a fresh issue and an offer for sale or OFS, where the promoter, Ashok Soota, will also be hiving off part of his stake in the company
· Investors in the retail category (with upper investment limit of Rs.2 lakh) will be allowed to bid for minimum 1 lot consisting of 90 shares and can bid for a maximum of 13 lots
· This is the first technology IPO in India in the last four years. The last tech IPO was from L&T Infotech which came out in the year 2016
· In the current COVID year, this is the third IPO hitting the market after SBI Cards hit the IPO market in March this year and Rossari Biotech hit in July 2020.
· Happiest Minds was floated by Ashok Soota, a Wipro veteran and founder promoter of Mindtree, which was sold last year to L&T
· In the grey market, the stock is current quoting at 60% premium to Rs.166. However, such prices are subject to change and also cannot be taken as authentic