A day after withdrawing draft red herring prospectus for its IPO, IT services firm L&T Infotech has filed revised papers with market regulator SEBI. The company, IT services subsidiary of engineering conglomerate L&T, is seeking regulatory approval for the IPO that would comprise of an offer for sale (OFS) of up to 1.75 crore shares. L&T currently owns 100% of the subsidiary.
In a stock market filing, L&T said it withdrew the earlier prospectus “due to change in the offer structure and other considerations”; however, it is worth highlighting that the number of shares to be sold through the offer remains the same. This means the offer size will be now reduced to INR1,300-1,400 crore from the earlier expectations of INR2,000 crore.
Prominent among other considerations must be pricing of the issue which is not yet revealed but several websites have indicated L&T was looking at valuations similar to its larger peers.
The IT services company was reportedly looking at a price/earnings (PE) valuation of around 24 times based on FY2015 earnings. After the latest negotiation with investment banks and the newly-filed prospectus, valuations have been reduced to around 16-17 times.
A noteworthy change has been that the issue will now be managed by Citigroup Global Markets India Pvt Ltd, Kotak Mahindra Capital Co Ltd and ICICI Securities Ltd. Barclays Bank Plc, one of the four banks originally named to manage the IPO, has withdrawn from the issue.
Although the draft prospectus is not yet available on SEBI website, another change could be the removal of Sharepro Services as registrar of the IPO. Sharepro Services has been banned by SEBI following an enquiry that revealed serious lapses in share transfer and dividend encashment services offered by the company.
The refilling of the prospectus comes as no surprise as this is in line with what we said yesterday:
The withdrawal of the prospectus by L&T Infotech is a strong indicator that the company will refile IPO papers again in coming months with updated details. If the company was not to go ahead with the IPO, it would have simply let the approval lapse as automotive components manufacturer Uniparts India and share brokerage firm SMC Global Securities have done.