Kicked off for subscription on Thursday, the IPO of LatentView has attracted many eyes in a day. The Rs 600 crore IPO was subscribed 39.24 times, wherein the public issue subscribed 88.12 times in the retail category, 10.05 times in QIB, and 66.17 times in the NII category by November 12, 2021 (11:56:00 AM).
The issue, which can be subscribed till Friday, has already received almost ten times bids. LatentView has offered 1,75,25,693 equity shares in this initial stake sale, and BSE data states that it has already received 17,47,70,892 bids. The majority of brokers and brokerage firms have rated the IPO ‘subscribe.’
The company has fixed the issue band at Rs 190-197, and the lot size for the issue is 76 shares. In rare cases, the GMP (Grey Market Premium) exceeds over 150% of its price in the IPO market. But, it is true with LatentView Analytics Ltd., where the running GMP as of November 12, 2021, is at Rs 295.
Revenue Details
LatentView follows a ‘managed services model’ for revenue generation. Their clientele is of 45 accounts where most of them are Fortune 500 companies. Unlike a technology company that works with CTOs and CIOs, the LatentView team works with functional heads of companies like the CMOs, CHROs, CFOs and even supply chain officers to ‘fuzzy and ill-defined problems’ of the business.
Almost 90% of their revenue comes from clients located in the US. They also have subsidiaries in European countries that include the UK, The Netherlands and Germany. Most of their clients are blue-chip companies, and they sign a master services agreement which is between three to five years. This further breaks into individual statements of work from 6 months to a year and are typically renewed. Over 65% of their business comes from managed services, out of which 80-85% is repeat business.
The company provides four services across four industries that include BFSI, Technology, Industrial and CGP & Retail. Out of their four services, Business analytics is their most-used service at 60-65%, followed by Consulting services at 15%, and Data engineering & Digital solutions together at 20%.
The company has been profitable and plans to use the raised money for growth and expansion. With the raised Rs 600 crores and their capital reserve, the company aims to fund inorganic growth initiatives and working capital requirements of Latent View Analytics Corporation, the company’s material subsidiary. They also plan to invest in their European subsidiaries to augment their capital base for growth. The company has seen profits, and the table suggests that they have a great capital reserve.
| Particulars | For the year/period ended (₹ in Millions) | ||||
| 30-Jun-21 | 30-Jun-20 | 31-Mar-21 | 31-Mar-20 | 31-Mar-19 | |
| Total Assets | 5,880.08 | 4,488.80 | 5,191.99 | 3,978.54 | 3,236.83 |
| Total Revenue | 917.43 | 823.81 | 3,267.08 | 3,296.72 | 2,959.03 |
| Profit After Tax | 223.14 | 228.04 | 914.63 | 728.45 | 596.65 |
Future Prospects
Incorporated in 2006, LatentView has a presence across countries in the United States, Europe, and Asia through their subsidiaries in the United States, Netherlands, Germany, United Kingdom, and Singapore, and their sales offices in San Jose, London, and Singapore. Some of their key clients include Microsoft, Uber Technology, Adobe, and 7-Eleven.
The company follows a 1:5 ratio for their onsite: off-site employees, hence saving costs in the margin. With their current revenue, LatentView Analytics Ltd. achieves USD 65 thousand dollars per employee, which is a testimony to their premium work. With only 45 clients in place, the leadership team of the company follows the philosophy of ‘going broader and deeper’ in individual accounts.
As per the number count of their clients, the company has increased lots of clients in the last three years. They made a strategic shift where they started perusing more enduring managed services type of relationships and contracts with their clients, rather than providing point expertise like data science. They added services where they support analytics at the front end and help the companies think through their digital and analytics strategy. LatentView helps businesses identify business options and solutions and build analytics centres of excellence that are exclusive and are actually extended capability for the companies. This shift in focus has helped them improve the managed services portion from 40% to 65%.
Risks and Competition
With fewer clients and high revenues comes dependency of money on each client. For LatentView, the revenue concentration is high as almost 50% of their revenue comes from their top five clients. This sounds like a significant concern for investors, but the company claims that they have ‘deep and meaningful’ relationships with their clients. Also, since these are large accounts spread across multiple geographies, there is a lot of untapped potential within these accounts to scale up.
Since the company provides niche services, they are uniquely positioned at each of their clients. In 2019, Data Analytics Market generated revenue of USD 22,998.8 Million and is projected to reach USD 132,903.8 Million by 2026, growing at a 28.9% CAGR. LatentView has currently projected a 25% growth post IPO.
As per the offer document, LatentView has listed Happiest Minds Techno as its key competitor. They were listed in September 2020, with a size of Rs. 702 crores. They showed a positive result for their subscribers, and the share price is currently at 1,302.50 (as of November 11, 2021). However, they cannot be compared on an orange to orange basis. LatentView has become more of an as-a-service company that includes consultancy, guidance and technology. While they have created their niche, their competitors can range from a management consultant company like McKinsey to a technology provider like Analytic Partners.
The Latent View Analytics IPO closing date is November 12, 2021. The issue is expected to list on November 23, 2021.
| IPO Open Date | Nov 10, 2021 |
| IPO Close Date | Nov 12, 2021 |
| Basis of Allotment Date | Nov 17, 2021 |
| Initiation of Refunds | Nov 18, 2021 |
| Credit of Shares to Demat Account | Nov 22, 2021 |
| IPO Listing Date | Nov 23, 2021 |
Wrapping up
From Zomato, Policybazaar, Oyo Rooms, Nykaa, to One97 Communications (Paytm) and Mobikwik, tech startups IPOs in India in the last few years have proved to be quite successful.
LatentView has been the latest entrant to this list and earns healthy margins on its contracts. Experts expect that it can generate a first-mover fancy post listing and suggest considering investing for the medium to long term rewards.
