Second public issue from the L&T group will be open for subscription on September 12 and will close on September 15. Priced at Rs 850-860 per share, L&T Technology Services aims to raise Rs 894.4 crore.
L&T Technology Services is subsidiary of engineering & construction major L&T.
The company on Friday already raised over Rs 268 crore from 19 anchor investors by selling shares at a price of Rs 860 ahead of its initial share sale.
Here are 10 things to know about the issue.
#1 L&T Technology Services through its IPO will be offering to sell 10.4 million shares. The offer is bifurcated into QIB portion of 5.2 million shares, non institutional portion of 1.56 million shares and retail portion of 3.64 million shares. The proceeds from the IPO would not accrue to the company, but would go to the promoter shareholders. The promoter would be diluting their shareholding in the company from current 100 percent to 89.8 percent.
#2 L&T Technology Services was formed by the combination of PES business from L&T Infotech (LITL), (except its unit in Germany), and the Integrated Engineering Services (IES) from L&T in FY14. LTTS with revenues of USD 468 million in FY16, operating in underpenetrated engineering and R&D (ER&D) outsourcing market size of USD67bn (addressable outsourcing market of USD365bn) and strong engineering parentage in the form of L&T.
#3 In FY16 the company reported USD revenue growth of 9.4 percent as it consciously exited from low margin tail accounts, while this resulted in loss of revenues it increased the margins by 180 bps YoY to 17 percent. Q1FY17 has seen EBITDA margin of 18.6 percent. Of the total, 50.3 percent of revenue in FY16 was derived from the three segments of industrial products, process industry and medical devices.
#4 L&T Group Chairman AM Naik the company is targeting 15-percent increase in revenue to USD 525 million in the current fiscal and USD 1 billion over the next three to four years through inorganic growth. He said the company wants to double revenue to USD 1 billion over the next three-four years, and will be looking at acquisitions with revenue of USD 150-200 million to achieve the target.
#5 It has two subsidiaries: L&T Thales Technology Services Private (74 percent) and L&T Technology Services LLC.
#6 It provides Engineering and R&D sector (ER&D)services, which is defined as the set of services provided to manufacturing, technology and process engineering companies, to help them develop and build products, processes and infrastructure required to deliver products and services to their end customers. It operates in five industry segments (transportation, industrial products, telecom and hi-tech, process industry and medical devices,
#7 Regionwise, it derives 80.2 percent of their revenues from customers in North America and Europe, which are the two largest regions of corporate ER&D spend and represented over 73 percent of the USD 1007 billion corporate ER&D services spend in 2015.
#8 It has 12 global delivery centres in India and overseas, 26 sales offices in India, North America, Europe, the Middle East and Asia and 31 labs in India. As of the date of this Red Herring Prospectus, it has filed 35 proprietary patents and 134 patents have been filed by our customers along with our employees. As of June 30, 2016, we have more than 8,000 engineers from nine nationalities serving over 200 customers, including more than 50 Fortune 500 customers. The average age of employees is 31 years.
#9 It has an exposure to foreign exchange rate risk in respect of revenues or expenses entered into in a currency, primarily denominated in USD, and Euro. Any significant appreciation of the rupee against foreign currencies is likely to have an impact on its business. To manage its foreign exchange risk, it is into various hedging arrangements relating to the major currencies.
#10 Its revenues are highly dependent on customers primarily located in North America and Europe as well as on customers concentrated in certain segments, notably industrial products, transportation, telecom and hi-tech, process industry and medical devices. “An economic slowdown or factors affecting these geographies or segments could materially adversely affect our business, financial condition and results of operations,” the company says.
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