Happiest Minds IPO opens Monday; should you subscribe for listing gains? check price band, details

Ahead of the issue, market participants believe that Happiest Minds’ valuation and fundamentals make it a good bet for listing day gains

IT consulting and software firm Happiest Minds Technologies will initiate the process of entering the bourses on Monday as its Initial Public Offering (IPO) opens for subscription. The Rs 700 crore issue will be accompanied by an offer for sale for 35.66 million shares and a fresh issue of Rs 6.6 million shares. Happiest Minds will be the first IPO to be up for subscription after Rossari Biotech, which saw a resounding response from investors, taking the share price up almost 100% from the issue price so far. The IPO market has been largely deserted so far this fiscal as the global pandemic wreaked havoc across the world.

Ahead of the issue, market participants believe that Happiest Minds’ valuation and fundamentals make it a good bet for listing day gains. “The price of Happiest Minds has been in the range of Rs 108-130 (per share) since the announcement of the IPO,” said Divam Sharma, Co-founder at Green Portfolio a SEBI Registered Portfolio Management Services company, as he discussed the grey market performance of Happiest Minds.

Here’s all you need to know about Happiest Minds Technologies IPO:

Issue Size and price band – The IT Consulting and Software company has fixed the price band for the IPO at Rs 165-166 per share. The issue includes an OFS taking the total issue size up to 42.2 million shares. Happiest Minds could manage to raise Rs 101 crore from the issue as the proceeds from the OFS will not be going to the firm

Lot size: The lot size has been decided to be 90 shares. This takes the application Rs 14,940 per lot at the upper band of the issue price.

Objective of the issue: Of the net proceeds from the fresh issue, Happiest Minds will be using the Rs 101 crore to meet long term working capital by the company. Rest of the amount will be utilized for general corporate purposes. 

Bidding date: The issue will open on September 7 for subscription and will close on September 9. Giving investors 3 days to subscribe to the issue.

Shareholding pattern: Post the IPO, promoter shareholding will drop from 61.77% to 53.25%. Public shareholding will jump to 42.86% from the current 34.16%.

Happiest Minds’ promoter, Ashok Soota, who is well known in the IT industry for leading the sector bigwig Wirpro in the 80s and 90s and for being one of the men behind Mindtree, though the issue is partially selling its stake, while a private equity investor CMDB II is fully exiting its 19.43% stake from the company. “At the higher price band, the issue seems to be fully priced as compared to its domestic peers. Happiest Minds earned an average 97.1% of the revenue from digital IT services as compared to its domestic peers, which earned in the range of 30-50%. Thus the company cannot be fully comparable to the domestic peers,” said brokerage and research firm Choice Broking while giving a ‘subscribe’ call to the issue. 

Happiest Minds Technologies offers services like cloud, SaaS, security and analytics. According to brokerage firm IIFL’s research report, 97% of the company’s revenues are classified as digital, compared to 35-50% for its traditional Indian IT services peers. In the April-June quarter, Happiest Minds reported a net profit of Rs 50 crore. At the end of last fiscal the company reported a net profit of R 83 crore. “The company has high customer stickiness and has steadily grown its repeat business from existing customers,” said Divam Sharma of Green Portfolio. According to him, the business potential, GMP and valuations of the Happiest Minds IPO suggest that the investors can expect a listing gain of over Rs 100 per share.