L&T Technology Services IPO will open for subscription on 12 September and will garner INR900 crore (INR9 billion). The upcoming IPO has been priced in the range of INR850 – 860 per share. The IPO will value the engineering services arm of engineering and construction conglomerate Larsen & Toubro (L&T) at around INR8,823 crore (INR88.23 billion).
In a stock market filing, L&T said the red herring prospectus (RHP) filed with the Registrar of Companies, Maharashtra has been approved. The IPO will close on 15 September. All the shares in the IPO will be sold by parent L&T through Offer for Sale (OFS) and thus, L&T Technology Services will not get any funds from the public offering.
The IPO will be managed by Kotak Mahindra Bank, Bank of America Merrill Lynch, JM Financial, and SBI Capital Markets. Karvy Computershare will be the registrar of the public offer.
Business doing well
The company offers engineering research and development services to manufacturing, technology and process engineering clients which are mostly based in North America and Europe. L&T Technology Services generated around 80.2% of its revenues in FY2016 from customers in these two regions.
The Vadodara based company, led by Dr. Keshab Panda, has been structured by integrating businesses of L&T Integrated Engineering Services from parent organization and some bits from L&T Infotech. In its prospectus, the company mentions
We are a company with limited operating history, and therefore investors may not be able to assess our prospects on the basis of historical results.
This is indeed the case as the company’s past financial results are available only for the last three years while comparable figures are only for the last two years. In its limited operating history, the company’s business has been doing well. During FY2016, L&T Technology Services generated revenue of INR3,142.7 crore (INR31.42 billion), marking a growth of 18.9% from the previous year. Similarly, its profits after tax (PAT) surged 34% in FY2016 to INR416.6 crore (INR4.16 billion).
But L&T is not a darling in IPOs
Prior to L&T Technology Services IPO, L&T got listed its information technology arm L&T Infotech in July. While the IPO generated immense interest and got oversubscribed 11.68 times, the discounted listing left a bad taste in mouth for investors. As a result, investors have a valid reason to be unexcited about L&T Technology Services IPO, although it will still be closely watched.
IPO Central will publish its analysis of the IPO in the coming days. Meanwhile, to know what other investors think about L&T Tech IPO, refer to this page.