Equitas Small Finance Bank

IPO NOTE

9-Nov-2120

Equitas Small Finance Bank

IPO NOTE IPO NOTE

LATENT VIEW ANALYTICS LTD.

Incorporated in 2006 in Chennai, Latent View Analytics provides services ranging from data and analytics consulting, business analytics andinsights, advanced predictive analytics, data engineering and digital solutions. It serves clients across countries such as United States,Europe, and Asia through their subsidiaries in the United States, Netherlands, Germany, United Kingdom and Singapore and have their salesoffices in San Jose, London and Singapore. Latent View has worked with over 30 Fortune 500 companies in the last three fiscals and some ofthe key clients include Adobe, Uber Technology and 7-Eleven.

FINANCIAL HIGHLIGHTS ISSUE DETAILS

ISSUE SIZE

OVERVIEW

₹ crore

Issue Date 10th Nov’21 –12th Nov’21

Price Band ₹190-₹197

Bid Lot 76 Shares

Issue Size ₹600 cr

No. of Shares (Post Issue) 19.8 cr

Post-Issue Implied Market Cap* ₹3,894.7 cr

Price to Earnings Ratio (FY21)*

42.6x

* At upper price band

FY19 FY20 FY21 Q1 FY22

Revenue from Operations 288 310 306 88

EBITDA 78 96 113 29

Net Profit 60 73 92 22

Total₹600 cr

Fresh Issue₹474 cr

Offer For Sale₹126 cr

ABOUT THE COMPANYThe company aims to help organizations interpret data accumulated fromsources such as business operations, social interactions and sensors by usingthe power of big data through business analytics and data insights. Itsexpertise includes digital solution accelerators, big data capabilities, socialmedia predictive analytics and analytics tools. In the last three fiscals itintroduced SmartInsights, MatchView and Spotcast new solutions.

Its scope of work is classified into:

• Consulting services- It involves understanding relevant business trends,challenges and opportunities and preparing a roadmap of data andanalytics initiatives that addresses them.

• Data engineering- Undertaken to design, architect and implement thedata foundation required to undertake analytics.

• Business analytics- It delivers analysis and insights for clients to takemore accurate, timely and impactful decisions.

• Digital solutions- It develops to automate business processes, predicttrends and generate actionable insights.

284.193%

11.74% 10.1

3%

United states India Rest of the world

REVENUE BREAKUP BY GEOGRAPHY(FY21)

Total: ₹305.9 cr

Rest of the world includes United Kingdom, Netherlands and Singapore

ABOUT THE COMPANY

165.9187.1 193.5

29.725.8

29.438.2

47.953.7

54.1

49.5 29.4

2019 2020 2021

Technology CPG and Retail Industrials BFSI

REVENUE BREAKUP BY INDUSTRY

It provides services primarily to companies in Technology, CPG (consumer packaged goods) and Retail, Industrials, and BFSI (Banking,Financial Services, and Insurance) industries. It has a diversified client base of 45 active clients worldwide that it served in FY21 including21 of the fortune 500. In FY21, count of clients stood as: less than ₹5 crore- 29, Between ₹5 crore to ₹10 crore- 10, between ₹10 crore to₹50 crore-5 and above ₹50 crore- 1 client. Revenue from operations from top five clients was ₹165 crore i.e. 54% of the revenue.

₹ crore

COMPETITIVE LANDSCAPE• Its competitors include large enterprise software companies and system integrators and many of its existing competitors have

substantial competitive advantages such as greater name recognition, longer operating histories, larger client bases and resources.

• The markets for data and analytics is very competitive and such competition is expected to continue or increase in the future. Certainof its competitors include Mu Sigma, Fractal, Tiger, Palantir and Accenture.

Fractal is one of the most prominent players in the

artificial intelligence space. Its mission is to power every human

decision in the enterprise and to bring AI,

engineering and design.

Mu Sigma is a pure-play big data analytics and

decision sciences company with a unicorn status in the US. It works

with more than 140 fortune 500 companies.

Tiger Analytics is pioneering what AI and analytics can do to solve

some of the toughest problems faced by

organizations globally. It has offices in multiple

cities across the US, UK, India, Singapore.

Accenture is a global services and consulting

company. It offers strategy and consulting,

technology and operations services.

COMPETITIVE LANDSCAPE

Particulars Mu Sigma Fractal Tiger Palantir Latent View

Revenue ₹949 cr ₹790 cr ₹84 cr $742 m ₹330 cr

EBIT Margin 42.2% (5.1%) 9.8% (74.5%) 28.2%

PAT Margin 32.3% (9.7%) 7.1% (78.1%) 22.1%

Return on Equity 28.2% (27.8%) 81.4% (395.4%) 20.9%

Days of Sales Outstanding 68 73 41 25 62

Particulars Market Capital Revenue EBITDA Net Profit Price to Equity

Latent View Analytics ₹3,894.7 cr ₹306 cr ₹112.9 cr ₹91.5 cr 42.6x

Happiest Minds Technologies Limited

₹19,532.8 cr ₹773 cr ₹191 cr ₹162 cr 123.3x

COMPARISON WITH LISTED INDUSTRY PEERS

SECTOR OUTLOOK Data and Analytics applications can be segmented into:

• EDM (Enterprise Data Management)- It refers to a set of processes, practices and activities focused on consolidating data fromdisparate sources.

• Descriptive & Diagnostic Analytics- It provides insights on past business events using historical data and statistical tools.• Predictive Analytics- It leverages data mining and advanced statistical models to predict future trends.• Prescriptive Analytics- It uses several complex techniques to recommend the best course of action for employees and agents of a

business.

BREAKDOWN OF DATA & ANALYTICS SPEND BY HORIZONTALS

$ billion

KEY ENTERPRISE FUNCTIONS• Customer Analytics- It is used to map individual customer journeys by integrating customer data for segmentation and hyper-

personalization.• Marketing Analytics- Enterprises leverage it to identify the right channel strategy to optimize return in investment in advertising

costs.• Supply Chain Analytics- It enables enterprises to collect and evaluate the data generated across the different stages of a supply chain.• Finance and Risk Analytics- It combines several statistical models and algorithms to measure and predict risks with a higher degree of

certainty.• Geospatial Analytics- It harnesses the power of geo-referenced data from various sources, contextualizes the traditional data with

timing and location information, allowing enterprises to uncover trends.

BREAKDOWN BY IN-SCOPE FUNCTIONS

PROMOTER BACKGROUND AND SHAREHOLDING The promoters of the company hold a total of 79.3% and theirshareholding is as follows:

• Adugudi Viswanathan Venkatraman (69.6%)

• Pramadwathi Jandhyala (9.7%)

Adugudi Viswanathan Venkatraman is the founder andchairman of the company and is also acting as a director.

Pramadwathi Jandhyala is a co-founder of the company.

Shareholding Pre IPO Post IPO

Promoters 79.3% 59.6%

Public 20.7% 40.4%

Total 100% 100%

Allocation of offer Share in Issue (₹ crore)

% of Issue

QIB 450 75%

NIB 90 15%

Retail 60 10%

Total 600 100%

Major Selling Shareholders Share in Issue (₹ crore)

% of OFS Issue

Adugudi Venkatraman 60.1 47.7

Gopinath Koteeswaran 23.5 18.7

Ramesh Hariharan 35 27.8

OBJECTS OF THE OFFER

EXPECTED DEPLOYMENT OF NET PROCEEDS

To be determined

Particulars Amount (₹ crore)

Estimated utilization of Net Proceeds

FY22 FY23 FY24

Funding inorganic growth initiatives 148

Funding working capital requirements of Latent View analytics, its subsidiary 82 38 17 27

Investment in its subsidiaries to augment their capital base for future growth 130 40 50 40

General corporate purposes

The actual deployment of funds towards funding inorganic growth initiatives will depend on a number of factors, including thetiming, nature, size and number of acquisitions to be undertaken, as well as general factors affecting its results of operation,financial condition and access to capital.

RISK FACTORS

• It has historically derived more than 90% of its revenues from operations from clients located in the United States of America.Since, significant portion of its revenue is being derived from clients located in United States and risks are associated with anyadverse developments in market of United States, it could adversely affect its business and revenues.

• If it is unable to sufficiently differentiate its offerings from the integrated or bundled products of existing competitors, it may seea decrease in demand for its services which could adversely affect its business, financial condition and results of operations.

• Exchange rate fluctuations may adversely affect its results of operations as some portion of revenues and a significant portion ofexpenditures are denominated in foreign currencies.

• Its revenues are highly dependent on a limited number of industry verticals and any decrease in demand for outsourced servicesin these industry verticals could reduce their revenues and adversely affect business, financial condition and results of operations.

• It relies on third-party data centers and cloud computing providers and any interruption or delay in service from these facilitiescould impair the delivery of its products and adversely impact business and results of operations.

• Its business depends on the ability to remain updated with new technologies and continue to develop digital solutions to addressthe needs of its clients, failing which its business and results of operations could suffer.

STATEMENT OF PROFIT AND LOSS

ParticularsData for the period

(₹ crore)

2019* 2020 2021 Q1 FY22

Revenue From Operations 288 310 306 88

Other Income 8 20 21 4

Total Income (I) 296 330 327 92

Employee Benefit Expenses 174 198 177 50

Finance Costs 3 3 3 1

Depreciation and Amortization Expense 7 7 7 2

Other Expenses 41 32 24 11

Total Expenses (II) 225 240 211 64

Profit/(Loss) Before Tax (I-II) 71 90 116 28

Total Tax Expense (III) 11 17 25 6

Net Profit/(Loss) for the Period (I-II-III) 60 73 91 22

*Proforma

STATEMENT OF ASSETS AND LIABILITIESParticulars Data as on 31st March (₹ crore)

2019* 2020 2021 30th June, 2021

Investments 99 72 139 139

Right of Use Assets 33 30 25 24

Trade Receivables 51 53 61 64

Cash & Cash Equivalents 47 75 135 179

Other Non-current Assets 39 65 38 49

Other Current Assets 55 103 121 133

Total Assets 324 398 519 588

Total Equity 267 348 438 462

Lease Liabilities 36 33 29 28

Trade Payables 6 3 3 7

Borrowings - - 23 67

Other Non-Current Liabilities 2 3 3 3

Other Current Liabilities 13 11 23 21

Total Liabilities and Equity 324 398 519 588

*Proforma

STATEMENT OF CASH FLOW Particulars Data as on 31st March

(₹ crore)Data as on

2019 2020 2021 30th June, 2021

Net cash generated from / (used in) operating activities (A) 64 63 90 16

Net cash generated from / (used in) investing activities (B) (47) (34) (45) (17)

Net cash generated from / (used in) financing activities (C) (6) (5) 17 36

Net increase / (decrease) in cash and cash equivalents (A+B+C)

11 24 62 35

Particulars Data as on 31st March As of & For 3

Months Ended

2019 2020 202130th June,

2021

EBITDA Margin 27.1% 30.9% 36.9% 32.7%

PAT Margin 20.7% 23.5% 29.9% 25.4%

Net Worth (₹ crore) 267 348 438 462

Return on Equity 22.4% 20.9% 20.9% 4.8%

Return on Capital Employed 27.2% 23.1% 23.9% 5.9%

KEY METRICS

KEY TAKEAWAYS• As a result of the Covid, client premises were non-operational and on account of safe-distancing measures and other restrictions

imposed by regulators globally, most onsite personnel were stationed offshore, which increased the billing ratio of offshore toonsite personnel for assignments.

• Total expenses decreased by 12% from ₹239.5 crore in FY20 to ₹210.8 crore in FY21, due to a decline in employee benefit expenseand reduction in advertising and sales promotion expenses and travelling and conveyance expenses due to Covid related travelrestrictions.

• Net cash generated from financing activities turned positive and was ₹17.3 crore in FY21, on account of proceeds from long termborrowing of ₹22.9 crore primarily in the United States, share application money pending allotment of ₹1 crore and proceeds fromexercise of share options of ₹0.2 crore.

• Net cash flows used in investing activities was ₹45.4 crore in FY21, primarily on account of purchase of property, plant andequipment of ₹1.8 crore and purchase of investments of ₹138 crore. This was partially offset by proceeds from redemption ofinvestments of ₹76.9 crore, proceeds from maturity of bank deposits of ₹9.6 crore and interest received of ₹8 crore.

SWOT ANALYSIS

• Latent View has a variety of service offerings across the data andanalytics domain. Approximately 90% of its revenue is derived fromclients of the United States of America. Top 5 clients account for 54%of revenues.

• Latent View has a strong client base and has worked with over 30Fortune 500 companies in the last three fiscals. Some of the keyclients include Adobe, Uber Technology, and 7-Eleven.

• They have identified Canada as an important and margin accretivemarket going forward.

StrengthsDiversified product

offerings

OpportunitiesGrowing data and analytics demand

ThreatsIntense competition

Dynamic market of technology

Weakness

High concentration risk

Disclaimer:

This document is published for learning purposes only and nothing contained herein shall beconstrued as a recommendation on any stock or sector.

IPO NOTE

Issue Opens

Issue closes

Finalization of basis of allotment

Initiation of refunds

Credit of shares to

depository

IPO Listing Date

10 Nov

16 Nov

17 Nov

18 Nov

22Nov

12 Nov

TIMELINES

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DISCLOSURES