News Analysis

What should you do post bumper listing of LatentView Analytics?

Hari Vishwanath | | Updated on: Nov 23, 2021
image caption

Much of company-specific positives are neutralised at current valuation

 

LatentView Analytics (LVA) followed through on its record subscription (326.49 times) with a bumper listing. The stock listed at ₹512.20 on the NSE, a premium of 160 per cent to its issue price of ₹197. It has given up some of the listing gains and, at the time of writing this, was trading at ₹474.70, a premium of around 141 per cent to issue price. This is, however, par for the course after the kind of premium listing it has had.

What should investors do now?

At ₹474.70, LVA trades at a pricey 102 times its FY21 EPS versus pre-IPO valuation of 37 times at issue price (pre-IPO valuation is based on share count prior to fresh issue). The multiple may go below 102 if one were to notionally assume some interest income on the cash of ₹474 crore that the company has raised from the IPO (this will add to FY21 EPS which is based on increased share count but without factoring benefit of interest income on the fresh issue). The overall impact of this, however, will not be very significant.

Given its pricey valuation, investors who got allotments can book profits and cash in on the gains. In our IPO note published on November 7, we had mentioned that while its valuation at 37 times earnings was at a premium to tier-one IT companies, it was justified on a relative basis considering the fact that LVA is a pure-play analytics company versus established players having a mix of legacy and digital business.

LVA had superior EBITDA margins at 34 per cent in FY21 versus around 28 per cent for companies like Infosys and TCS. However, much of these positives are neutralised at its current PE of 102 times. Thus, booking profits now and looking at better re-entry opportunities probably driven by macro-driven corrections may be a better option.

Business

If ‘data is the new oil’, then it would also be fair to say that data analytics is the new refinery that converts the raw products (data troves) into useful downstream derivatives (analytical/actionable insights). As a data and analytics company, LVA aims to help organisations interpret data accumulated from sources such as business operations, social interactions and sensors by using the power of big data through business analytics and data insights. Through its services the company aims to enable companies to increase revenue generation opportunities, improve efficiency, reduce costs and increase competitiveness.

LVA, founded in 2006, was an early mover in this space and has gradually established its presence although it has had to compete against well-established IT services giants. The company has also adopted a prudent approach since inception by building a bootstrapped business. Amongst pure-play analytics companies in India, LVA is one of the leading players.

Published on November 23, 2021

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

COMMENTS
This article is closed for comments.
Please Email the Editor

You May Also Like

Recommended for you