Taking a view on Latent View Analytics IPO

Latent View Analytics Ltd is perhaps the first full-fledged and pure play analytics company in India to come out with an IPO. Latent View straddles the entire gamut of digital and data analytics and brings with it a track record of execution as well as expertise. This is topped with a profitable track record with fairly upper-band margins. Latent View has expertise across the analytics value chain and includes data analytics, business analytics, analytics consulting, predictive analysis, data engineering and critical digital solutions.

Latent View will come out with an IPO of Rs.600 crore. The issue will open for subscription on 10-November and close on 12-November. Latent View is likely to have an indicative market cap of Rs.3,900 crore on listing based on the upper band price of the IPO.

The Rs.600 crore IPO of Latent View Analytics will combine fresh issue and an OFS.

  1. Latent View will issue 240.61 lakh fresh shares and at the upper price band of Rs.197, the fresh issue size works out to Rs.474 crore.
  2. The OFS will comprise sale of 63.96 lakh shares by existing early investors at upper price band of Rs.197, giving it an OFS size of Rs.126 crore.
  3. The total issue size will be of 304.57 lakh shares worth Rs.600 crore. Post the IPO, promoter’s stake will stand reduced from 79.30% to 66.42%.

Unlike most of the digital plays, this is a pure service company and is already a consistently profit making company. Just if you look at a critical parameter like the EBITDA margins, it has grown 980 bps over last 2 years to 36.90%. Even the ROE has been stable above 20%.

Let us quickly look at the P/E discounting implied in the price. If you extrapolate the net profit of Rs.92cr in FY21 by the CAGR 20% profit growth rate, FY22 profits would be near Rs.110 crore. At the starting market cap of Rs.3,900 crore, it gives a price earnings (P/E) discounting of 35.41 times. That is reasonable if you look at the robust growth and ROE.

Taking a view on Latent View Analytics IPO

While the final decision to invest must be based on your goals and the advise of your financial advisor, here are some critical points to factor in.

  • Latent View is a consistently profit making business in high-end analytics with stable ROE and EBIDA margins are on an upswing. It has had the benefit of sticky client behaviour for over 5-6 years which promises deepening client ROI.
  • The business model is substantially scalable with the potential to improve ROI per customer with ease. This can be value accretive without deep additional investments, especially as customer engagement is deepened.
  • It provides analytics services to blue chips in technology, retail, BFSI, CPG, industrials and manufacturing and these are based on deep insights, which Latent View has developed over a period of time. That is evident from Forrester and Gartner ratings.
  • Latent View has clients spread across the US, Europe and Asia with marquee names like Adobe, Uber Technologies, 7-Eleven etc. Revenues from the top-5 clients account for 54% of the total revenues, which is understandable in a niche service.
  • Lastly, the fresh issue component of Rs.474 crore will be used for inorganic mergers & acquisitions (Rs.148 crore) and funding capital of US subsidiaries (Rs.212crore). These are expected to be value accretive.

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