Latent View Analytics: Premium listing likely

Latent View Analytics Ltd is tapping the markets with its fresh issue for Rs474 crore and an offer for sale of Rs126 crore in a price band of Rs190-197. The issue opens on Wednesday (November 10) and closes on Friday (November 12).

The company allotted 1,35,53,898 equity shares at Rs197 to 19 anchor investors comprising 34 entities. The highest allocation was made to Abu Dhabi Investment Authority of 10,15,968 shares or 7.5 per cent of the anchor book. The company also allotted an almost equal number of shares ranging between 6.7- 6.9 per cent of the anchor book to nine anchor investors. The company allotted 82,23,346 shares or 60.7 per cent of the anchor book to 12 domestic mutual funds comprising of 25 anchors. The names include Aditya Birla Sun Life AMC, Ashoka India, Axis Mutual Fund, Kotak, Nippon and Mirae amongst others.

The company is in the business of data analytics and has assumed a leadership position in the same. It offers end to end business solutions. It has its expertise in areas of technology, BFSI, industrials, Retail and CPG. The company has global delivery centres in Chennai and Bengaluru. It also offers consulting led solutions which in turn ensure longer client relationships and sustainable business.

Latent View offers solutions and service offerings through consulting services, business analytics and insights services, data engineering and digital solutions. The bulk of its revenues comes from the US. Margins for the company have improved during the covid-19 period on primarily two counts. One of course has been travelling and hospitality costs which reduced significantly because of covid-19. The second was re-engineering where the company was able to convince the clients to shift from on-shore to off-shore. While a greater part of the travel costs would come back in the quarters to follow, the re-engineering benefits are here to stay. The company is confident of being able to maintain margins in the 25-58 per cent level on a sustainable basis.

Latent View has a host of marquee clients that it serves. Some of these include Adobe, Uber the ride hailing app, a leading snack company in the US, 7-Eleven a leading US Retailer and a leading European luxury car manufacturer.

One cause of concern in Latent View is the fact that it has for various reasons failed to achieve a constant growth in terms of revenues even though margins at the EBITDA and PAT levels have been very healthy. The company reported revenues of Rs 288 crore in FY19, Rs310 crore in FY20 and Rs305 in FY21. There has been some growth witnessed in the first quarter of FY22 when the revenues have improved to Rs87.8 crore. If one were to annualise the same it would mean an annual revenue of Rs351.2 crore for FY22.

Latent View is present in a business which is expected to grow at a CAGR of about 18 per cent over the next five years. The company enjoys long term relationships with its customers and a large part of its business is repeat business from the same set of customers. This includes new engagements and added business as well.

The company reported revenues of Rs305.88 crore for the year ended March 2021 and a net profit of Rs 91.46 crore. The EPS for the year ended March 2021 was Rs 5.10 on a fully diluted basis. The PE at the price band is 37.25-38.63 times based on March 2021 diluted earnings per share.

The issue has been very well received and has done exceedingly well on the first day of subscription with the retail portion being subscribed more than 26 times. Overall, the issue is subscribed more than 5.25 times. To add to the comfort is the fact that grey market indicates that the premium is in excess of over 110-115 per cent of the issue price. Considering the nature of the business, the response the issue has received and the fact that there is a 100 per cent plus premium available, investors should apply for the issue and hope that they are lucky in getting allotment.

(The author is the founder of Kejriwal Research and Investment Services, an advisory firm)