L&T Technology Services IPO will hit capital markets on September 12 with public offer of 1,04,00,000 shares of Rs 2 each in a price band Rs 850-860 per equity share. The issue will close on September 15. Shares of the company are proposed to be listed on BSE as well as NSE. Book running lead managers to the issue are DSP Merrill Lynch, Kotak Mahindra Capital Company, SBI Capital Markets and JM Financial Institutional Securities.
Below are the five things you should know before investing in the IPO of L&T Technology Services:
1) About the company: The company is a leading global pure-play engineering, research and development (ER&D) services company. It provides ER&D services, which is defined as the set of services provided to manufacturing, technology and process engineering companies, to help them develop and build products, processes and infrastructure required to deliver products and services to their end customers.
2) Objective of the issue: The motto of the issue is to get the benefits of listing the equity shares on the stock exchanges and to carry out the sale of up to 10,400,000 equity shares by the selling shareholder. The listing will increase the company’s brand name and provide liquidity to the existing shareholders. L&T Technology Services will not get any proceeds from the public offer.
3) Strong Parentage: The company benefits from the engineering expertise of Larsen & Toubro, which was recognised as the eighth most valuable brand in India in 2015 and is a brand associated with strong global engineering capabilities, quality of service and reliability. Association with the L&T brand provides it with a competitive advantage in attracting talent, benefiting from promoter’s global network, exploring potential business opportunities, corporate governance practices and acquiring direct access to senior decision makers in potential end customers.
4) Financials: For the financial year ended March 31, 2016, the company reported a net profit of Rs 434.24 crore, up 37.78 per cent, against Rs 315.18 crore last year. It had reported net profit of Rs 6.21 crore in FY2013-14. L&T Technology’s total income increased by 14.84 per cent to Rs 2,969.40 crore in 2015-16 as compared to Rs 2,585.62 crore in 2014-15. Operating profit margin of the company improved in 2015-16 to 19.13 per cent from 14.93 per cent in 2014-15 on the back of depreciaton of rupee and higher manpower utilisation.
5) Should you invest: Brokerage firm Angel Broking believes that L&T Technology trades at 21 times FY2016 EPS at upper end of issue price band. On considering the company’s strong growth potential, which is ahead of some of the industry peers, coupled with over 38 per cent RoE levels in the previous financial year, average cash flow from operations of Rs 446cr in 2015-16 and robust dividend payout, the brokerage sees potential in L&T Technologies shares and they can trade at premium to the peers. Angel Broking has given ‘Subscribe’ rating to the issue.
KR Choksey Shares and Securities is also positive on the public offer. The brokerage house said, “We like L&T Technology Services as a long term story and advise investors to ‘Subsribe’ the IPO of the company. We are positive on company due to strong parentage, market growth opportunities, market penetration opportunities and likely higher share of new technologies going forward which will improve margins and drive future growth for the company.”