Larsen & Toubro Infotech (LTIL), India's seventh largest IT services firm by revenue, is coming up with an Initial Public Offering (IPO) of 17.5 million equity shares through 100% book building route, which will open for subscription on Monday, July 11, 2016 and will close on Wednesday, July 13, 2016.
The price band for the issue has been fixed at Rs 705 to Rs710. The entire IPO proceeds will go to the company's promoter, L&T. The offer will constitute 10.3% of the post offer paid-up equity capital of LTIL.
Brokerage firms Reliance Securities and Angel Broking have recommended 'Subscribe' to IPO of Larsen & Toubro Infotech.
Commenting on the investment rationale, Reliance Securities, said, ''At the price band of Rs 705-Rs 710 per share, the LTIL offer comes at a PE of 13.0x-13.1x trailing (FY16) EPS, which is at 25-30% discount to peers like Mindtree & Hexaware. LTIL is 24% & 83% larger than Mindtree & Hexaware, respectively in terms of revenue, and earns substantially higher RoE.
In our view, Mindtree will continue to command a growth premium, given industry-beating revenue growth and substantial digital exposure. We believe LTIL with its revenue size, high return ratios and redoubtable parentage should command ~10% PE discount to Mindtree on inferior growth, while the IPO price band indicates a much larger discount. Thus, we believe the promoters have left something on the table for the investors in terms of valuations, which we view as a major positive factor in favour of the IPO. We recommend SUBSCRIBE to the IPO on the back of scale, redoubtable parentage, high return ratios and reasonable valuation.''
Meanwhile, Angel Broking, said, ''LTI has reported a strong CAGR of 20.1% and 23.1% on the revenue and net profit fronts respectively over FY2011-2015. At Rs 710, which is the upper end of the offer price band, the company is available at ~13x its FY2016E earnings, which is at a slight discount to its mid-cap peers trading at an average PE of ~15x FY2016E earnings.
Plus, assuming that the company maintains its historical average rate of dividend pay-outs, it would translate into a yield of 4-5% for the investor. Apart from the favourable prospects of the company, we also foresee decent gains on listing. Thus, we recommend a Subscribe to the issue.''
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