IT services firm Larsen & Toubro (L&T) Infotech has withdrawn its draft red herring prospectus (DRHP). The company, IT services subsidiary of engineering conglomerate L&T, got the SEBI approval to bring its initial public offering (IPO) to raise INR2,000 crore late last year.
L&T Infotech registers about USD1 billion (INR6,700 crore) in topline every year and remains the third largest contributor to the parent’s consolidated revenues.
“Change in the offer structure and other considerations” was cited as the reason behind the decision to withdraw the prospectus by the parent firm L&T. However, a spokesperson had other reasons to share.
The reason we have withdrawn the IPO is because of market conditions. And we want to relook at our pricing. The IT industry undergoes changes on a quarterly basis and it is only fair to investors, in any issue, that they take a call on the financial performance of the most recent quarter
– Deepak Morada, Vice President, L&T
However, there is still a possibility that L&T Infotech may revisit the IPO market at a later stage. “It is possible that we may file a fresh DRHP at some future date, but we cannot offer a specific comment on the matter at this stage,” said another spokesperson.
L&T Infotech’s issue was to comprise of an offer for sale (OFS) of up to 1.75 crore equity shares, or 10.85% of the share capital by L&T, according to the draft prospectus filed in September 2015. It received the regulatory go ahead for the IPO on 31 December that was valid for a year. As a result, the withdrawal is perplexing. 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. Uniparts’ validity ended on 19 February while SMC Global Securities’ 12 month time frame ended on 8 April this year.
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. According to SEBI regulations, companies need to file updated documents and seek separate approval if the issue size changes substantially. A recent example is SSIPL Retail which refiled its offer documents in October after making changes in its IPO plans.