The Bengaluru-based IT services company’s listing day gains beat those of Avenue Supermarts, which had also seen a bumper listing in 2017, with the shares rising 114%.
Shares of Happiest Minds Technologies ended Thursday at Rs 371 per share against the issue price of Rs 166 apiece and an opening price of Rs 350 a piece.
Industry veteran and serial entrepeneur Soota started his career with Shriram Group of companies and was later hired by Azim Premji to build Wipro’s IT business. In 1999, his career took a fresh turn when he founded MindTree along with 10 other senior executives; Mindtree went on to become one of the most valuable mid-tier IT companies listed in India.
The spectacular responses to the IPOs of both Happiest Minds and Rosari Biotech suggest that along with the secondary markets, the primary markets, too, have revived. The 700-crore issue of Happiest Minds was subscribed by 151 times, indicating appetite for fresh issues.
The pandemic had dampened the primary market, after companies raised Rs 12,000 crore last year. Rosari Biotech was the first company to bite the bullet and hit the IPO market after the pandemic struck. Not only did the issue get subscribed 80 times, it also clocked 60% gains on listing day. Public issues of many more companies like CAMS, UTI AMC, Angel Broking, and Chemcon Speciality Chemicals are slated to hit the public markets in and around September.
Hemang Jani, head of equity strategy, at Motilal Oswal Financial Services, is of the view that with the sharp turnaround in secondary markets and broader market also participating in the rally, the primary market is reviving once again. “A slew of IPOs are expected to hit the street in second half of CY20. Promoters are rushing to the primary market to make most of the opportunity. The increase in liquidity flows is also helping their cause,” he said.
Bloomberg data show that the IPO of the IT services firm is the best one since IRCTC’s debut on the bourses in October 2019, which surged by 127% on listing day. Its listing-day gains have outperformed that of other noteworthy IPOs of Central Depository Services (CDSL) and HDFC Asset Management Company, which saw listing day gains of 75% and 65%.
IT analysts that FE spoke to said the company was trading at a price earnings multiple of 28 to 30 times, among the most expensive in the IT space. Rusmik Oza, EVP, Kotak Securities, said investors felt confident about the stock because of its management team led by Soota. “It needs to be seen how the stock performs once the euphoria has settled and whether the company will be able to maintain or accelerate the pace of growth. The company has been growing at more than 20% when the sector growth is 10%. Given that the size of company is small with primary focus on digital, it has the ability to show very high compounding growth in future. Hence, investors are not looking at the valuations as much till the time growth remains high,” he said.
According to the red herring prospectus, the company clocked a profit after tax of Rs 71.71 crore for fiscal 2020 and its revenue from operations stood at Rs 698.21 crore. The company has generated 97% of its revenue from digital IT businesses and offers services to multiple business segments such as edu-tech, hi-tech companies, BFSI, travel, as well as media and entertainment.