HAPPIEST MINDS TECHNOLOGIES LIMITED

Started in 2011, Positioned as 'Born Digital. Born Agile', Happiest Minds Technologies Ltd is a IT Service provider company based in Bengaluru. Company's offerings include, among others, digital business, product engineering, infrastructure management and security services. Their capabilities provide end-to-end solution in the digital space.  Company helps the customers in finding new ways to interact with their users and clients enabling them to become more engaging, responsive and efficient. Company also offers solutions across the spectrum of various digital technologies such as Robotic Process Automation (RPA), Software-Defined Networking/Network Function Virtualization (SDN/NFV), Big Data and advanced analytics, Internet of Things (IoT), cloud, Business Process Management(BPM) and security. Majority of company's revenue comes from USA (77.5%), then India (10.9%) and UK (9.8%). That may be concern in future. In FY20, 96.9% of the company's revenues came from digital services which is one of the highest among Indian IT companies. As of June 30, 2020, they had 2,658 personnel comprising 2,469 full-time employees and 189 contract workers. Company helps the customers in finding new ways to interact with their users and clients enabling them to become more engaging, responsive and efficient. Company also offers solutions across the spectrum of various digital technologies such as Robotic Process Automation (RPA), Software-Defined Networking/Network Function Virtualization (SDN/NFV), Big Data and advanced analytics, Internet of Things (IoT), cloud, Business Process Management(BPM) and security. On financial performance front, Happiest Minds has posted turnover/net profits of Rs. 489.12 cr. / Rs. (25.22) cr. (FY18), Rs. 601.81 cr. / Rs. 17.36 cr. (FY19) and Rs. 714.23 cr. / Rs. 60.53 cr. (FY20). For Q1 FY21, company has posted Rs 186.99 Cr turnover and Rs 54.51 Cr profit. Thus company has posted good growth over last couple of years on consistent basis except losses in FY18. Company has posted an average EPS of Rs. 3.63 and average RoNW of 3.1% for last three fiscals. Issue is priced at a P/BV of 7. Listed peers are shown in above table. If we attribute latest earnings of FY20 on fully diluted equity post issue, then asking price is at a P/E of around 40 and if we annualise FY21 earnings and the asking P/E is 11.33. So this IPO looks fairly priced. The comparison between peers is shown in above table, but it can't be compared strictly. On BRLM's front, for ICICI Securities Limited and Nomura Financial Advisory And Securities (India) Pvt Ltd, both have handled around 13 IPOs in last three fiscals, and from last 10 IPOs, 5 opened below issue price and remaining opened above issue price on the day of listing. As of now, from last 10 IPOs, 3 are trading below issue price and remaining above issue price. ( As on 04.09.2020 ) As per financials, company's growth is good, RoNW is 27.1% for last three fiscals and issue is priced at P/E of around 40 as per FY20 and 11.33 as per annualised FY21. When we compare it with other listed players, using Q1 FY21 super earnings, than it looks very reasonably priced. Company's main focus is on digital services and that segment is expected to grow with good rate. Performance of BRLM is average. If company is able to sustain good margins like Q1 FY21, than in long run, it may give very good returns. So we give SUBSCRIBE rating to this IPO.

• 1 Mr. Ashok Soota