Digital IT services firm Happiest Minds Technologies IPO intends to raise an estimated Rs 702 crore. The company has fixed a price band of Rs 165 to Rs 166 per equity share for the IPO, which will be open for subscription from Sept. 7- Sept9, Happiest Minds Technologies IPO offer comprises a fresh issuance of shares aggregating up to Rs 110 crore, and an OFS (offer for sale) of up to 3.56 crore equity shares. The company’s promoter Ashok Soota will offer 8,414,223 equity shares and private equity fund JP Morgan CMDB-II is making a total exit and will offer 27,249,362 shares as part of OFS through this IPO.

Happiest Minds Technologies IPO Details

Issue Opens Monday, 7th September, 2020*
Issue ClosesWednesday, 9th September, 2020
Anchor investor Bidding4th September, 2020
Face Value₹ 2/-
Issue Details‘Fresh Issue of Equity Shares aggregating upto ₹ 110 Cr
 +Offer for Sale of upto 35,663,585 Equity Shares
Issue Size (Rs. Cr)₹ 698 Cr – ₹ 702 Cr
Price Band₹ 165 – 166
Bid Lot90  Shares
Issue Structure : 
QIB75% of the offer 
NIB15% of the offer
Retail10% of the offer (4,229,009 Shares ) ( 70.20^ Cr)
Appls for 1 x Retail 46988
BRLMsICICI Securities, Nomura Financial
RegistrarKFIN Technologies Pvt. Ltd..

Updates

ANCHOR ISSUE:

Ahead of its IPO, Happiest Minds Technologies raised a total of Rs 315.91 crore from 25 anchor investors. The investors include Government of Singapore, Pacific Horizon Trust, Kuwait Investment Auth Fund, and nine mutual funds like HDFC, Axis, Aditya Birla, L&T, Sundram, SBI, Franklin etc. among many others.

About Happiest Minds Technologies Ltd.

  • The company is promoted by Ashok Soota, considdered one of the doyen of India’s IT industry. He was earlier Wipro vice-chairman and also was behind promoting Mindtree
  • Happiest Minds was founded In April 2011 by Ashok Soota, Aurobinda Nanda,Dattatreya Salagame, Joseph Anantaraju, Puneet Jetli, Raja Sekher, Raja Shanmugam and Salil Godika. The company received funding in November 2011 from JP Morgan Asset Management, Intel Capital and Ashok Soota.
  • The company claims to be positioned as “Born Digital. Born Agile” with focus on delivering a seamless digital experience to its customers.
  • Happiest Minds Technologies offerings include, among others, digital transformation, product engineering, infrastructure management and security services.
  • Its capabilities provide an end-to-end solution in the digital space.
  • Company has developed a customer-centric focus that aims to provide them strategically viable, futuristic and transformative digital solutions. It offers solutions across the spectrum of advanced digital technologies such as Robotic Process Automation (RPA), Software-Defined Networking/Network Function Virtualization (SDN/NFV), Big Data and advanced analytics, Internet of Things (IoT), cloud, Business Process Management (BPM) and security.
  • As of March 2020, the company had 157 active customers.
  • It has a global presence in countries like US, UK, Australia, Canada and the Middle East.

Happiest Minds Technologies: Financials

Particulars/ Rs. Cr2020 (03)2020 (12)2019 (12)2018 (12)
Revenue from Operations177.02698.21590.36462.89
Revenue Growth (%)18.27%27.54%
EBITDA as stated47.82113.1266.287.62
EBITDA (%) as stated#25.60%15.80%11.00%1.60%
Profit Before Tax40.8473.6112.98-23.08
Net Profit for the year~50.1871.7114.21-22.47
Net Profit as % to Revenue28.35%10.27%2.41%-4.85%
EPS (₹ ) as stated3.737.041.89-3.13
Equity Share Capital20.448.795.973.75
Instruments entirely in the nature of Equity^12.9536.3422.322.29
Reserves as stated285.62220.18-94.32-134.92
Net worth as stated319.01264.21-67.27-109.02
RONW (%)15.70%27.10%-21.10%-20.60%
NAV (₹ )23.726-8.9-15.2
ROCE (%)12.70%28.90%
ROE (%)15.70%27.10%
FV2
EPS (₹ )13.42
Dividend (%)
Equity Post IPO21.1
IPO Price166
EPS (Post Issue) FY196.80
PE FY19 24.42
EPS annualized19.03
PE Post IPO8.73
P/BV7.00
Market Cap1751
Mcap/Sales2.51

Pros

  • Growing high revenue generating customer accounts with a high proportion of repeat revenues andrevenues from mature markets;
  • Scalable business model with multiple drivers of steady growth;
  • End to End capabilities spanning the digital lifecycle from roadmap to deployment and maintenance ;
  • Strong R&D capability with depth in disruptive technologies creating value through newly engineered solutions;
  • Agile Engineering and Delivery
  • Mindful approach towards systems, employee policies and practices led by an experienced leadership andsenior management team focused on sound corporate governance practice
  • The business units of the company is assisted by the 3 Centres of Excellence which are Internet of Things, Analytics / Artificial Intelligence, and Digital Process Automation.
  • After the IPO the portion of pledged shares shall be nil.
  • Employee attrition rate is lowest at 18%

Cons

  • Revenues from operations are highly dependent on customers located in the United States.
  • operate in a rapidly evolving industry
  • competition from onshore and offshore IT services companies
  • Risk from Anti-outsourcing legislations if adopted in the countries where company’s customers are based.

Happiest Minds Technologies IPO: Assessment

  • Promoter Ashok Soota holds 48.83 %, while private equity investor JP Morgan Investment Management CMDB II has 19.43% shareholding (2,72,49,362 equity shares) in the company. JP Morgan is making a complete exit.
  • Post issue, promoter stake will decline to 53.25% as compared to present stake of 61.77%.
  • Frost & Sullivan Report estimates that In 2019, the global enterprise digital spend stood at USD691 billion and represented about 16.3% of the total technology spend within the IT sector. By 2025, the enterprise digital spend is projected to be around 34% of the total technology spend with the digital spending growing at a healthy CAGR of 20.19%.
  • The company has Strong focus on Digital IT services.
  • As much as 97% of the company’s revenue comes from digital, which is much higher than peers Infosys Ltd, Cognizant, and Mindtree Ltd, where the average contribution from digital stands at 40-50%.
  • Substantial portion of company’s revenues is generated from repeat business, which indicates a high degree of
  • customer stickiness. Over FY18-20, repeat customers contributed around 90% of the revenue and these repeat customersinclude more than 35 Fortune 2000 /Forbes 200 corporations.
  • The company posted a net profit of Rs 71.70 crore in FYE 20 against Rs 17.36 crore last year.
  • Happiest Minds is well positioned to overcome the challenges fron covid-19 pandemic as 76% of its business is not impacted.
  • The IT firm has high exposure to “edutech” and “high tech” verticals which have grown during the pandemic and have good scope going forward.
  • The company’s revenues for FY20 at ₹714 crore grew at a CAGR of 20.8% between FY18-20. The revenues for the first quarter ended March stood at an impressive ₹187 crore.
  • Considering the Q1 Fy 21 results , Price to earning ratio looks reasonsable and considering the credentials of the promoters, company’s business profile, there appears good scope for upside.
  • Kostak currently stands at Rs. 500 and GMP is ~ Rs. 100/- (04-09-20)
  • I intend to apply in Happiest Minds Technologies IPO. Due to just 10% reservation for retail, chances of allotment are poor due to expected heavy oversubscription which could be in range of 20 times.
  • Do check this page for any last minute updates

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2)  Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors.  I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or  leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.