Latent View Analytics IPO - Information Note

5paisa Research Team 5paisa Research Team 11th December 2022 - 07:46 pm

Latent View Analytics Ltd, which specializes in providing a host of data analytics services, will come out with an IPO of Rs.600 crore. The issue will open for subscription on 10-November and close on 12-November. It will be a combination of fresh issue and an offer for sale.

The indicative market cap of Latent View is expected to be Rs.3,896 crore at the upper end of the IPO price band.

Latent View Analytics is one of the few pure play data analytics companies in India with the added advantage of making consistent profits over the last 3 years.

Its expertise straddles the entire analytics value chain including data analytics, business analytics, consulting, advanced predictive analysis, data engineering and overall digital solutions.

Key terms of the IPO issue of Latent View Analytics Ltd

Key IPO Details	Particulars	Key IPO Dates	Particulars
Nature of issue	Book Building	Issue Opens on	10-Nov-2021
Face value of share	Rs.1 per share	Issue Closes on	12-Nov-2021
IPO Price Band	Rs.190 - Rs.197	Basis of Allotment date	16-Nov-2021
Market Lot	76 shares	Refund Initiation date	17-Nov-2021
Retail Investment limit	13 Lots (988 shares)	Credit to Demat	18-Nov-2021
Retail limit - Value	Rs.194,636	IPO Listing date	22-Nov-2021
Fresh Issue Size	Rs.474 crore	Pre issue promoter stake	79.30%
Offer for Sale Size	Rs.126 crore	Post issue promoters	66.42%
Total IPO Size	Rs.600 crore	Indicative valuation	Rs.3,896 crore
Listing on	BSE, NSE	HNI Quota	15%
QIB Quota	75%	Retail Quota	10%

_{Data Source: IPO Filings}

Here are some of the key merits of the Latent View Analytics Ltd business model

a) Latent View Analytics provides analytics services to blue chips in technology, retail, BFSI, CPG, industrials, manufacturing etc.

b) Forrester recognized the company as Strong Performer in analytics in 2017 and 2019 while Gartner recognized the company in its Market Guide in 2017.

c) Its clients are spread across the US, Europe and Asia and include some marquee names like Adobe Inc, Uber Technologies, 7-Eleven, among others.

d) The average tenure of its working relationship with most Fortune 500 companies has been to the tune of 6 years and more.

e) Revenues from the Top-5 clients accounts for 54% of the total revenues, but that is an acceptable risk in such B2B niche and high-end services.

Check - Latent View Analytics IPO - 7 Things to Know

How is the Latent View Analytics IPO structured?

The Latent View Analytics IPO will be a combination of a fresh issue and an offer for sale having an overall IPO size of Rs.600 crore. Here is a gist of the IPO offer.

A) The fresh issue component will comprise issue of 240.61 lakh shares and at the peak price band of Rs.197, the fresh issue value works out to Rs.474 crore.

B) The OFS component will comprise the issue of 63.96 lakh shares and at the peak price band of Rs.197, the OFS value works out to Rs.126 crore.

C) This will take the total issue size to 304.57 lakh shares with an IPO value of Rs.600 crore. Post issue, promoter’s stake will reduce from 79.30% to 66.42%.

The fresh issue component of Rs.474 crore will be allocated to inorganic mergers & acquisitions (Rs.148 crore), Funding capital and working capital of US subsidiaries (Rs.212crore). These funds will be expended over the next 3 years.

Key Financial parameters of Latent View Analytics

Financial Parameters	Fiscal 2020-21	Fiscal 2019-20	Fiscal 2018-19
Sales Revenues	Rs.305.88 cr	Rs.310.36 cr	Rs.287.93 cr
EBITDA	Rs.112.88 cr	Rs.95.85 cr	Rs.78.05 cr
Net Profit / (Loss)	Rs.91.46 cr	Rs.72.85 cr	Rs.59.67 cr
EBITDA Margins	36.90%	30.88%	27.11%
ROE	20.89%	20.94%	22.36%

_{Data Source: Company RHP}

The company has a consistent track record of profitability and robust margins. For example, the EBITDA margins have grown by nearly 980 basis points over the last 2 years to 36.90%. The Return on Equity, a key metrics of valuation, has been stable above 20%.

If you consider the profit of nearly Rs.92cr in FY21 and extrapolate its 20% profit growth rate, the net profit for FY22 would be closer to Rs.110 crore. At the IPO market cap of Rs.3,896 crore, it gives a price earnings (P/E) discounting of about 35.4 times. Considering the current ROE and the consistent growth in profits as well as the very niche positioning in a high growth and high-end business, such valuations surely look acceptable.

Investment Perspective for Latent View Analytics Ltd

a) It offers a consistently profit making business in high-end analytics with stable ROE and constantly improving EBIDA margins.

b) Deep relations and sticky client behaviour over a consistent period of 5-6 years show good promise of the ability of the company to sustain revenue and profit growth.

c) Valuations at 35.4 times forwards earnings of FY22 offers a reasonable deal considering its margins, profit growth and unique positioning.

d) The business model is scalable with the potential to improve ROI per customer substantially over the years. This can be value accretive without deep additional investments.

Analytics is the road ahead and Latent View is one of the few pure play analytics businesses available in India. It looks like a risk worth taking.

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