L & T Technology IPO Review (Apply)

• IPO Details
• Stock Price
• Docs
  • RHP
  • DRHP
• Reviews
• Subscription
• News
• GMP
• Allotment
• BoA
• Messages

Review By Dilip Davda on September 7, 2016

L & T Technology Services Ltd (LTTS) is a leading global pure-play 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. LTTS operates in a large and growing global market derived from a global corporate ER&D spend of US$1,007 billion in 2015, of which the ER&D spend of the top 500 global ER&D spending companies was US$614 billion in 2015. The estimated addressable ER&D outsourcing opportunity for ER&D service providers was US$365 billion of the G500 ER&D spend in 2015. US$67 billion of the corporate ER&D spend of US$1,007 billion is currently addressed, which represents a penetration of 6.7% and offers potential growth opportunities. By region, it derives 80.2% of revenues from customers in North America and Europe, which are the two largest regions of corporate ER&D spend and represented over 73% of the US$1,007 billion corporate ER&D services spend in 2015.

The top 100 spenders in the G500 ER&D spend contribute 66.3% of the G500 ER&D spend and LTTS’s key global customers include 43 of the top 100 global ER&D spenders, which offers significant growth opportunities for existing customer accounts.

The company operates in five industry segments (transportation, industrial products, telecom and hi-tech, process industry and medical devices, each of which represent a significant component of G500 ER&D spend. 50.3% of its revenue in FY 2016 was derived from the three segments of industrial products, process industry and medical devices. These three segments represent US$205 billion of G500 ER&D spend and have low penetration by India based third-party ER&D service providers, which gives LTTS a competitive advantage.

LTTS delivers services through a network of delivery centres located across the U.S. and India and from its customers' locations. The majority of work is executed by employees based out of delivery centres in India using an offshore delivery model, giving LTTS a competitive advantage in terms of talent pool availability and lower costs compared to its US and European competitors.

The company is coming out with a maiden IPO in the form of Offer for Sale of its 10.2% of post issue capital. The company is issuing 10400000 equity share of Rs. 2 each in a price band of Rs. 850-860 to mobilize Rs. 884.00 cr. - Rs. 894.40 cr. based on lower and upper price band. Issue opens for subscription on 12.09.16 and will close on 15.09.16. Minimum application is to be made for 16 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. BRLMs to the offer are Kotak Mahindra Capital Co. Ltd., DSP Merrill Lynch Ltd., JM Financial Institutional Securities Ltd and SBI Capital Markets Ltd. Karvy Computershare Pvt Ltd is the registrar to the issue. Being offer for sale, its post issue equity remains same at Rs. 20.34 cr. It issues equity at par in 2012-2014 and then it hiked the face up value of its equity in January 2016 and then reduced it in April 2016 with transfer of residual portion to reserves. In June 2016 it issues rights shares at a price of Rs. 281 per share. Average cost of acquisition of equity shares for the promoter is Rs. 103.25 per share.

On performance front, the company has posted turnover/net profit of Rs.2643.89 cr. / Rs. 310.90 cr. (FY15), Rs. 3142.72 cr. / Rs. 416.65 cr. (FY16). For first three months of current fiscal, it has earned net profit of Rs. 123.68 cr. on a turnover of Rs. 833.39 cr. If we attribute these earnings on the post IPO capital, then asking price is at a P/E of 35. Against industry composite of 25 plus.

On merchant bankers’ front, the four BRLM’s associated with the offer have handled 22 public issues in the past three years out of which seven issues closed below the issue price on the listing day.

Conclusion: The issue is from the Group reckoned for its market friendly gestures. This is the second IPO from the group in this year. However, last IPO from the group failed to live up to confidence post listing. Long term investors may consider investment in this issue as the company is one among the few in the world providing technology solutions.

L&T Technology IPO FAQs