L&T Infotech IPO Review – Should you invest?
Mumbai based, L&T Infotech IPO would open for subscription on 11th July, 2016. L&T Infotech Limited is one of the India’s leading global IT services and solutions companies. The company revenues grew at 20% CAGR in last 5 years. This is the 13th mainline IPO in India in 2016. What are the positive factors in a L&T Infotech IPO? What are the hidden factors about this IPO? Should you invest in this L&T Infotech IPO or not? In this article, I would do L&T Infotech IPO Review, would give reasons to invest and reasons not to invest. Myinvestmentideas is the unique blog that gives unbiased review about the IPO's in India.
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About L&T Infotech Limited
L&T Infotech is one of India’s leading global IT services and solutions companies. In 2015, NASSCOM ranked it as the sixth largest Indian IT services company in terms of export revenues. They are amongst the top 20 IT service providers globally in 2015 according to the Everest Group’s PEAK Matrix for IT service providers. Its clients comprise some of the world’s largest organisations, including 43 of the Fortune Global 500 companies. They offer an extensive range of IT services to its clients in diverse industries such as banking and financial services, insurance, energy and process, consumer packaged goods, retail and pharmaceuticals, media and entertainment, hitech and consumer electronics and automotive and aerospace. Its range of services includes application development, maintenance and outsourcing, enterprise solutions, infrastructure management services, testing, digital solutions and platform-based solutions. They serve its clients across these industries, leveraging its domain expertise, diverse technological capabilities, wide geographical reach, an efficient global delivery model, thought partnership and “new age” digital offerings.
Issue details of L&T Infotech IPO
- IPO opens: 11-Jul-2016
- IPO closes: 13-Jul-2016
- Face Value: Rs 1 per share
- Issue price band: Rs 705 to Rs 710 per share (updated). Retail investors would get Rs 10 discount.
- Issue size: Rs 1,400 Crores on lower price band
- Market lot: 18 shares and in multiples of 18 shares therein
- Minimum investment: Rs 12,780 on lower price band (excl discount)
- Lead Managers: Citi Global, Kotak Mahindra, ICICI Securities.
- Listing: BSE / NSE
- Download L&T Infotech IPO Prospectus at this link.
Objects of the L&T Infotech IPO issue
- To achieve the benefits of listing the Equity Shares on the Stock Exchanges and
- To carry out the sale of up to 17,500,000 Equity Shares by the Selling Shareholder. The company would not get any proceeds.
- Issue expenses.
Company Financials (reinstated-Consolidated)
- The company generated revenue of Rs 2,462.68 Crores for the year ended Mar-11 and Rs 5,069.53 Crores for the year ended Mar-15. Revenues for the year ended Mar-16 are awaited.
- The company posted a profit of Rs 331 Crores for the year ended Mar-11 and profit of Rs 769.16 Crores for the year ended Mar-2015. Profits for the year ended Mar-16 are awaited.
- Its restated EPS for FY 2015 is Rs 47.21 and last 3 years average EPS Rs 43.77
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Reasons to invest in L&T Infotech IPO
- Strong revenue growth of 20% CAGR in last 5 years.
- Good Profits of over 15% in last couple of years.
Reasons not to invest in a L&T Infotech IPO
- Company, its Directors, Subsidiaries, Promoter and Group Companies are involved in certain legal and other proceedings.
- Company business will suffer if they fail to anticipate and develop new services and enhance existing services in order to keep pace with rapid changes in technology and the industries on which they focus.
- Intense competition in the market for technology services could affect its pricing, which could reduce its share of business from clients and decrease its revenues and profitability.
- Company revenues, expenses and profitability may be subject to significant fluctuation and hence may be difficult to predict. This increases the likelihood that its results of operations could fall below the expectations of investors and market analysts, which could cause the market price of the Equity Shares to decline.
- Exchange rate fluctuations in various currencies in which they do business could negatively impact its business, financial condition and results of operations
- Company revenues are highly dependent on clients primarily located in North America and Europe, as well as on clients concentrated in certain industries, notably banking and financial services, insurance, energy and process, and consumer packaged goods, retail and pharmaceuticals. Its revenues are also dependent on two service lines; therefore, an economic slowdown or factors that affect the economic health of North America or Europe, these industries or these service lines could adversely affect its business, financial condition and results of operations.
- Company revenue depends to a large extent on a limited number of clients, and its revenue could decline if they lose a major client.
- Other risk factors (Internal and external) can be viewed in the draft prospectus from Page no. 19 onwards.
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Recommendation / Investment strategy – L&T Infotech IPO
- On the upper price band of Rs 710 and on FY15 EPS of Rs 47.21, P/E ratio works out to 15x. Similarly, on last 3 years EPS of Rs 43.77, P/E Ratio works out to 16.2x. Means company is asking the upper band of issue price of Rs 710 for a P/E ratio between 15x to 16.2x.
- Its listed peers like TCS is trading at a P/E ratio of 25, Infy at 20, Wipro at 17.8 and HCL at 17.7. Hence, the L&T Issue price of Rs 710 is reasonably priced. Retail investors would get Rs 10 discount on this price too. Means, retail investors would get this at Rs 703 on upper price band.
- Company revenues grew at 20% CAGR in last 5 years. Its margins are also good. Its issue price is reasonably priced. Considering all these factors, one can invest in this IPO from a long term perspective. If you are able to get good listing gains, you can have a party too.
Disclaimer: I have an interest in investing in this IPO. The idea of giving positive and negative factors to investors in this article is to create awareness and education about this IPO. One should NOT constitute this as investment advice to buy or not to buy this IPO. Please consult your investment advisor before you invest in such high risk investment options.
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Suresh
L&T Infotech IPO Review – Should you invest
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Apart from the above, net proceeds from the IPO would be utilized to pay the offer expenses including fees to book manager, listing fees and stationery.
L&T Infotech shares opened at Rs.666.60 on BSE compared to the issue price of Rs.710 per share. Does this mean we will get a refund on the amount we paid while subscribing to the IPO?
I think 20 share per Lot .. u have mentioned it has 18.
hi last time i applied one lot for quick heal i didn't got any allotment this time how many lots i should apply to get allotment. Allotment would be on what basis can you please tell me?
Dear sir
i wan to invest in this script ,,can u tell me that is this script good for invest ?
Regards
Tejas
Hi Tejas, As indicated, I am positive about this IPO. You can invest. However since stock investments are high risk, you should consider this before investing
very well analytical view. you may invest with cautions as i think.
Sir, I would like to buy as an individual, please let me know steps to proceed.
You need to have demat account for that to apply.
HI Sir,
I have axis demat Account. how should i apply for retails. Is i need to choose Retail ASBS or Please advice
Thanks
Fair Review. One can invest for long term
Hi Sir,
Will L&T employees get preferential allotment or are elegible for more discount?
No seperate preferences/concessions for L&T employees
Hi Suresh,
What is the minimum number of shares that you recommend applying for as a retail investor to ensure allotment of shares in L&T Infotech? On the same note, is there a strategy or formula to apply in the case of any IPO to ensure share allotment?
Priya
Hi Priya, You can apply for 2-3 lots.
It is a Rs10 discount for RI. check the prospectus please.
I corrected Saloni, apologies for the error
Hi,
Whether retail investent in IPO would be at the rate of Rs.639 (after 10% discount) or we have to pay Rs.710 only initially ?
Thanks
Discount ir Rs 10 to Retail Category only not 10%. Please check. I have confirmed this from NSE website.
I have corrected this Abhishek, apologies for the error
The issue price for RII is Rs.700.If we take the latest EPS available as Rs. 47.21, the PE works out to 14.83 times. If we take the average industry PE as 15 times the price comes to Rs.708. At 16 times it comes to Rs 755. Assuming market will value it at 16 times the investor can make Rs 55 per share which is not great. The current market run up if gives way , (worst case scenariothe )PE may drop below 15 . There is every possibility of investor facing loss as issue pricing gives wafer thin margin of comfort. I would say better avoid and buy after listing if you sre very keen.
Hi Suresh,
I have a very basic doubt. When I am applying for IPO, will it matter the price at which I apply for ?
Take the same example this Ipo price band is 705-710. What is the difference if I apply @705 or @710. Will I be alloted with the price I have applied with ? Or with the price they have finalized ? Will the allotment take the price I have applied for into consideration while alloting shares ??
I dont know the difference and I always apply for higher price band. And luckily I was alloted in some issues.
If majority of bidders are applying at higher price band, then their application would get approved and yours would rejected and money would be refunded to you.
Hi, when investing in ipo u mention to bvv, you can invest 2-3 lots.
My question is 1 lot is 18 shares, so if u were to buy 36 shares that would be classed as one investment or two.
Is it possible to apply for ipo on say day one for 18 shares and then apply again the next day for another 18 shares.
Or do you have to make application just one time.
As i am new in investment, can anyone please explain me what is IPO open and IPO close.
Thank you
Can one apply in multiple applications from same Dmat account or from different Dmat account i.e. Under same pan number?
is it advisable to apply in min lot or max permissible lot?
Thanks, Sir
If it is in Same PAN no, and it is oversubscribed several times you may get only one lot irrespective of lots you applied
Are u looking to invest in it?
Hi,
Is it 10 rupees discount or 10% discount?
Please clarify.
Hi Darth, It is 10%
Actual it is Rs10 if you look at the NSE media statement. Since the discount is Rs 10 and not 10% will you still fancy this IPO. I think this IPO is like Percision camshaft good company however the future is with lot of if and buts and market does not like question mark so IMO it is At Par issue
Dear Suresh,
As per price band upper Rs.710/- x 18 shares, the maximum application amount coming to Rs.12780/-.
(not Rs.14004/-).
Hoping i am not mistaken.
Regards
Suraj Shetty
Delhi
I just corrected Suraj. Thanks for pointing out.
1 lot in L&T infotech is 20 shares I guess.
What best should be the investment am amount? Can you help me as a new investor in IPO? By new I mean with current market systems and not updated with latest system of investment in India as I am out of India since last 10 years.
You can invest 2-3 lots BVV
Hi SUresh,
Once again a fantastic article.
You can also add one point.
For Retail Investors, the issue price will be at 10% discount i.e. 705 – 710 per share.
Also, would appreciate if you can provide your valuable feedback on my comment on SH Kelkar IPO article of yours.
Awaiting your response on the same.
Regards,
ROHAN ADC
I have already updated Rohan. Waht is your query on SH Kelkar IPO?
Hi Suresh, thanks for the analysis. Other side, there are bunch of SME IPOs are getting issued in next week. Any good pick(s) out of them, can you suggest.
Hi Suresh, I stopped SME IPO review as I felt they are not good for large investors. In case there are any good SME IPO’s, I would review for sure
My Name is Raja working in Dubai. My Monthly Salary in INR is Rs.1.Lac. A
I can save monthly around Rs.20000. I prefer Money Back Policy, but in these policy I can only get 4yrs only, Could you advice any other Plan to get some money earlier.
Also advise me about investing SIP – Mutual Fund, Any Minimum Guarantee Money or money returns every 4 years.
I prefer you not to go for money back policy. You can consider term insurance plan and invest balance in mutual funds. You can invest in large cap funds indicated in my top 10 mutual funds. Link available on home page.
My Name is Raja working in Dubai. My Monthly Salary in INR is Rs.1.Lac. After my personal expense’s here, I am sending Rs.80000 to Indian NRI account.
My Monthly Expenses are à
Rs. 25000 Home Loan (18 Lac – 10 Years) – 3 years Completed
Rs. 10000 LIC Money Back Policy (20 Years) – 1 year completed
Rs. 20000 House Monthly Expense
Other Monthly Expense (Monthly average) Rs .5000
Total Monthly Expense – Rs. 60000
I can save monthly around Rs.20000. I prefer Money Back Policy, but in these policy I can only get 4yrs only, Could you advice any other Plan to get some money earlier.
Also advise me about investing SIP – Mutual Fund, Any Minimum Guarantee Money or money returns every 4 years.
Please correct price band and related ratios. Its 705-710 (Rs 10 discount to retail)
Thanks,
Shyam Singh
I have updated this morning Shyam
Dear Suresh
Thanks for giving timely information about IPO's. You are always the first person to give us insights and your viewpoints about upcoming IPO and I read all your posts regarding IPO's.
Good work and good analysis
Thank you Karan for your kind words. I too visit your website and found it is very useful.
HI Suresh Jii ,
Rcom going to introduce jio , the price of Rcom very cheap competitive to last 10 years . Whats your views on it
Issue looks good. Except that :
1. Proceeds will not go to the Company. Means no money to be available to the company for growth and expansion.
2. It is asking same PE which Wipro and HCL Technologies are commanding. These two companies are more than approx. 30-35 years old companies having weathered all kind of verticals of a full spectrum IT services company and a king of vetern in their field.
Therefore to me, price is high. PE of around 15 would have been more appropriate as to leave some thing for the investors also on the table.
Hi Kamal, I have updated the price band now. Retail investors would get 10% less price. P/E ratio now is less. I feel it is attractively priced now.
Hi Suresh,
Is there a best way to get the allotment of the share in any IPO? Any best practices you are using? I undestand that there is not 100% chance that we will get allotment in any IPO.
Thanks
Apply first day, apply thru your account + spouse account (if available), apply for 2-3 lots. These are some of the tips i implemented and was successful for some times.
Is it good to apply on higher band always? What if the issue price is lower then higher band, will I get allotment and refund access money? thanks..
Yes, you would get allotment as well refund of money
HI
Any idea of Discounted price for L&T Employees on this IPO???
Please advice.
10% retail discount available. I have updated in the article.