Ahead of the start of subscription on 11 July, L&T Infotech IPO has garnered positive analyst recommendations. While most brokerage houses have offered a favorable view of the upcoming IPO, some have done a great job of highlighted concerns which indicates that the IPO is not likely to create the same magic seen in the IPOs of Quess Corp and Mahanagar Gas.
Echoing our views on the offer, analysts at Hem Securities note that the IPO is offered at a discount to its listed peers. “At price band of Rs 705-710 per share (including Rs 10 discount to retail investor), the p/e multiple will turn out to be 12.98-13.07 on post issue FY16 eps of Rs 54.31 of company. Co looks reasonably priced when compare to its peer Infosys (p/e of 20), Mindtree (p/e of 18), TCS (p/e of 20), Tech Mahindra (p/e of 16), Wipro (p/e of 15), HCL Tech (p/e of 14).Therefore on valuation parameter, co looks attractive to deploy the funds in. Hence, we are recommending ‘Subscribe’ on issue,” said the research IPO note of the brokerage house.
IIFL says that L&T Infotech represents a credible investment option in the mid-cap IT space (comprising mid-sized players like Mindtree, Persistent and Cyient) that has traditionally had dearth of stable and scalable players. Due to attractive dividend yield of 4.5% and other reasons, the brokerage house has put a SUBSCRIBE rating on the IPO but has also pointed out that investors “should subscribe to the issue without heavy expectations of substantial listing gains”.
Analysts at Angel Broking recon that the IPO price band values L&T Infotech at a discount to similar sized IT players. “Assuming that the company maintains its historical average rate of dividend payouts, it would translate into a yield of 4-5% for the investor. Apart from the favorable prospects of the company, we also foresee decent gains on listing. Thus, we recommend a SUBSCRIBE to the issue,” said the broker report adding to the upcoming IPOs positive analyst recommendations.
Analyst recommendations were positive at Reliance Securities also which suggests that clients should invest in the IPO. “We believe LTIL with its revenue size, high return ratios and redoubtable parentage should command ~10% PE discount to Mindtree on inferior growth, while the IPO price band indicates a much larger discount. Thus, we believe the promoters have left something on the table for the investors in terms of valuations, which we view as a major positive factor in favour of the IPO. We recommend SUBSCRIBE to the IPO on the back of scale, redoubtable parentage, high return ratios and reasonable valuation,” said the broker report.
In its IPO report, Ajcon Global notes that L&T Infotech will not be impacted by Brexit and thus, emerges as investment grade IPO. In its note, the brokerage house said, “With due consideration to factors like a)strong domain focus enabling Business to-IT Connect, b)strong parentage and brand equity of the Promoter, c) established long – term relationships with its clients, d) extensive portfolio of IT services and solutions, focus on emerging technologies, e) track record of established processes and executing large, end to end, mission critical projects, f) conducive work environment to attrat and retain talent, g) track record of strong financial performance, h) lean balance sheet with virtually no debt, i)robust ROE of 45%, j) no Brexit impact, we recommend investors to “SUBSCRIBE” the issue.”