Information technology (IT) firm, Larsen & Toubro (L&T) Infotech made a weak debut on the bourses on Thursday. The stock ended the session at Rs 697.65 apiece, down by 1.73% over the issue price of Rs 710 after listing at Rs 666. Post listing, the stock commands a market capitalisation of Rs 11,939 crore.
The initial public offering (IPO) has fetched L&T Rs 1,242.5 crore at a price of Rs 710 per share. The issue was an offer for sale (OFS) of over 1.75 crore shares by the existing promoter L&T and was oversubscribed 11.55 times. Post issue, the stake of the parent firm L&T has fallen by 10.3% to 84.6% from 94.9%.
According to the guidelines put out by the Securities and Exchange Board of India (Sebi), the issue had reserved 50% of the shares for the qualified institutional buyers (QIB) category, 15% for high net-worth individuals (HNIs) and 35% for retail investors.
A discount of Rs 10 was offered to retail individual bidders.
Between January and July 20, 12 companies have raised Rs 8,182.57 crore through IPOs, according to Prime Database. Bengaluru-based staffing firm, Quess Corp, which recently listed on the bourses had received a strong response. The stock listed at Rs 499, a premium of 57.41% to the issue price of Rs 317.
L&T Infotech had allotted 52.50 lakh equity shares, aggregating to Rs 372.75 crore to 22 anchor investors. These included HDFC Trustee, Birla Sun Life Trustee, ICICI Prudential, Reliance Capital, New India Assurance, Max Life Insurance, BNP Paribas, Tata Aia Life Insurance, Reliance General Insurance and Union Bank of India.
An anchor investor is a QIB who applies for shares worth Rs 10 crore or more through the book-building process. The concept of an anchor investor was introduced by Sebi in July 2009. An anchor issue is held one day prior to the public issue and these investors must comply with a lock-in period of 30 days from the date of allotment. Prior to June 2014, up to 30% of the QIB portion in an issue could be reserved for anchor investors. However, the quota for anchors was raised to 60% in June 2014.
Guidelines put out by Sebi state that a minimum of five and maximum of 25 such investors shall be permitted for allocation upto Rs 250 crore. However, in case of allocations beyond Rs 250 crore, SEBI approved that there can be 10 additional investors for every additional allocation of Rs 250 crore.
In FY16, L&T Infotech reported revenues of Rs 5,908.1 crore, up 22.24% and net profts of Rs 938.1 crore, up 21.27%. Total expenses of the company rose by 22.47% to Rs 4,641.1 crore. Citibank is a big client and contributes 15% of the firm’s revenues. In FY16, digital services accounted for 11.1% of its revenue. The company generates the majority of its revenue from banking, financial services and insurance, followed by energy and process, retail and pharma, automotive and aerospace, media and entertainment, and hi-tech and consumer electronics.
Between January and July 20, the BSE IT Index has fallen 3.6%. L&T’s Technology Services has also filed its draft red herring prospectus (DRPH) with Sebi. According to the DRHP, the issue is an offer for sale by L&T of up to 1.04 crore equity shares aggregating to Rs 1,000 crore. Post issue, the stake of the parent firm L&T will be reduced by 15%. On Thursday, shares of L&T and L&T Finance Holdings closed at Rs 1,556.26 and Rs 74.85, respectively down 0.96% and 1.45% respectively, on the BSE.