Shares of Happiest Minds Technologies Ltd made a strong stock market debut on Thursday. The issue was listed at ₹350, a whopping premium of 110.84% from its issue price of ₹166 per share. The ₹702 crore initial public offering (IPO) was subscribed 150.98 times.
The three day sale was during 7-9 September, with a price band of ₹165-166 a piece. Proceeds of the IPO will be used to meet Long term working capital requirements and general corporate purposes. The issue was lapped up among investors due to its valuations and business prospects especially post covid-19 outbreak when there is general shift towards digital products.
“At the higher end of the price band, the issue is valued at 29 times FY20 price to earnings (PE), which is comparable to larger mid-sized IT companies,” said analysts at Motilal Oswal Financial Services Ltd. Its strong presence in digital services, scalable business model with end-to-end capabilities and fast improving financial performance are some of the factors that analysts at the brokerage firm like about Happiest Minds.
The company derives 97% of its revenues from digital IT services by offering services like cloud, SaaS, security, analytics and IoT, compared to 30-50% for traditional Indian IT services peers. It caters to multiple business verticals of which major contribution comes from edutech (21% in FY20), Hitech (21%), BFSI (18%) and TME (travel, media and entertainment 17%).
Over FY18-20, its revenue grew at a CAGR of 23% to ₹700 crore, while it stood flat for Q1FY21. Its EBITDA margin improved from -4% in FY18 to 13.9% in FY20 and 21.4% in Q1FY21. Its average revenue per customer has increased from $471,472 in fiscal 2018, to $ 501,562 in fiscal 2019 to $614,675 in fiscal 2020.