The IPO mania continues! Latent View Analytics, a leading data analytics company, launched its initial public offering (IPO) on November 10. The issue had received a great response on the first day of bidding. Let us take a closer look into the company and learn more about its IPO. 

Company Profile – Latent View Analytics Ltd

Before investing in any company, it is always important to understand what it does or learn about the different products and services it offers. Latent View Analytics Ltd (LVAL) is a pure-play data analytics services company. It provides services such as data and analytics consulting, business analytics & insights, advanced predictive analytics, and digital solutions. The company caters to enterprises in Technology, Banking, Financial Services & Insurance (BFSI), Consumer Packaged Goods (CPG) & Retail, and other industry domains. 

LVAL classifies its business into four divisions:

  1. Consulting services – Involves understanding relevant business trends, challenges, and opportunities and preparing roadmaps of data and analytics initiatives that address them. 
  2. Data engineering – Design, architect, and implement the data foundation required to undertake analytics.
  3. Business analytics – Delivers analysis and insights for clients to make more accurate, timely, and impactful decisions.
  4. Digital solutions – Automate business processes, predict trends, and generate actionable insights.

Latent View has worked with over 30 Fortune 500 companies in the last three financial years. It serves clients across the United States, Netherlands, Germany, Singapore, and the United Kingdom. Some of the company’s key clients include Adobe, Uber Technology, and 7-Eleven. Enterprises primarily use their services to guide business strategy and optimize spending decisions. It helps them improve cash flows, profitability, marketing campaigns, and inventory management.

About the IPO

The public issue opens on November 10 and closes on November 12. The company has fixed Rs 190-197 per share as the price band for the IPO.

The fresh issue of shares (of the face value of Rs 1 each) aggregates to Rs 474 crore. The offer for sale (OFS) by existing shareholders aggregates to Rs 126 crore. Individual investors can bid for a minimum of 76 equity shares (1 lot) and in multiples of 76 shares thereafter. You will need a minimum of Rs 14,972 (at the cut-off price) to apply for this IPO. The maximum number of shares that can be applied by a retail investor is 988 equity shares (13 lots). 

Latent View Analytics will utilise the net proceeds from the IPO for the following purposes:

  1. Funding inorganic growth initiatives – Rs 147.9 crore.
  2. Funding working capital requirements of Latent View Analytics Corp (a subsidiary) – Rs 82.4 crore.
  3. Investment in subsidiaries to boost their capital base for future growth – Rs 130 crore.
  4. General corporate purposes.

Financial Performance

LVAL has posted a consistent increase in profits over the past three financial years (FY19-21). Its net profit rose 25.4% YoY to Rs 91.4 crore for the financial year ended March 2021, while total income fell 1% YoY. The company’s operating margin expanded as a result of lower travel expenses and cost efficiencies. Earnings before interest, taxes, depreciation, and amortization (EBITDA) margins has increased from 27.11% in FY19 to 36.90% in FY21.

The company’s business model is highly scalable with the potential to improve the return on investment (ROI) per customer with ease. The Return on Equity (ROE) has been stable above 20%. ROE is a key metric of valuation that signifies how well a firm uses shareholders’ capital to generate profits.

Risk Factors

  • Latent View Analytics derives ~59.3% of the total revenue from its top five clients. The company’s operations could be adversely affected if existing clients do not renew their contracts or if long-term relationships are terminated.
  • More than 90% of LVAL’s revenues are derived from clients located in the US. Any disruption in the US market could impact their business.
  • Fluctuations in exchange rates may severely impact its financial performance as a significant portion of its expenditures are denominated in foreign currencies.
  • The failure to remain updated with new technologies and develop digital solutions to address the needs of clients could harm its overall operations.
  • LVAL faces intense competition in the data and analytics market. Its peers include TCS, Happiest Minds Technologies, Accenture, and Capgemini. The company may lack sufficient financial resources to maintain or improve its competitive position.
  • Revenues are highly dependent on a limited number of industry verticals. The decrease in demand for outsourced services in these verticals could adversely affect its business.

IPO Details in a Nutshell

The book-running lead managers to the public issue are Axis Capital, Haitong Securities India, and ICICI Securities. Latent View Analytics Ltd had filed the Red Herring Prospectus (RHP) for its IPO in November 2020. You can read it here.

Ahead of the IPO, LVAL raised Rs 267 crore from 34 anchor investors. The marquee investors include Abu Dhabi Investment Authority (ADIA), Ashoka India Opportunities Fund, HSBC, Hornbill Orchid India Fund, Mirae Asset, etc. 

Conclusion

Latent View Analytics has extensive experience across a wide range of data and analytics capabilities. It delivers solutions that help companies drive digital transformation and use data to gain a competitive advantage. Data analysis is gaining momentum across the globe, and thus, the company has bright prospects ahead. According to LVAL’s prospectus, the analytics services market is expected to grow at a compounded annual growth rate (CAGR) of 19% to reach $68 billion in 2024!  The company can benefit from the growth in this market, provided that they launch improved offerings and strengthen its client base. One could also invest in the company for the long term due to its decent track record and future prospects.

LVAL’s public issue has been receiving a massive response since its launch. As of 12:55 PM today, LVAL’s IPO has been subscribed 10.59 times! We expect institutional investors to show more interest in the IPO towards its closing on Friday evening. On the other hand, the Grey Market Premium (GMP) of the company’s IPO shares stands at ~Rs 285. It means that shares are being traded in the unofficial market at Rs 285 more than the issue price. As always, do consider the risks associated with this company and come to your own conclusion.

What are your views on Latent View Analytics’ IPO? Will you be applying for it? Let us know in the comments section of the marketfeed app.

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