Former Wipro and Mindtree exec’s firm Happiest Minds Tech’s ₹702 crore IPO⁠ — what works for it and what doesn’t

• The IPO will remain open for subscribers until September 9.
• The company has fixed the issue price band at ₹165-166 per equity share.
• Microsoft, Amazon Web Services, McAfee, IBM, and PTC are some of its partners.

The Bengaluru-based IT speciality company Happiest Minds Technologies, which develops software for independent vendors and technology companies, is set to float ₹702 crore initial public offer (IPO) in the market on September 7.

The IPO will remain open for subscribers until September 9. And, the company has fixed the issue price band at ₹165-166 per equity share.

The company is backed by the IT marquee Ashok Soota, who is the promoter, executive chairman and the director of the company. Soota was the founding Chairman and Managing Director of MindTree, which completed a successful IPO during his tenure. He has also been the vice-chairman of Wipro and senior vice president of Shriram Refrigeration Industries.


Here's what makes the IPO hot!

The sector is poised to grow, and its listed peers are proof of that

Happiest Minds Technologies is from the sector that is poised to grow over the coming years, as technology takes over the world. According to the Axis Capital report, nearly 96.9% of the company’s revenue came from digital services in the fiscal year 2020, which is one of the highest among Indian IT companies.

The gains in other listed Indian IT stocks are proof of safety that investors have found in the sector.


The company’s strong customers base and big names on its list make it interesting

As of June 30, Happiest Minds has a strong customer base of 148 active customers. According to Axis Capital, its revenue from existing customers has steadily grown and contributed a significant portion of its revenue, indicating a high degree of customer stickiness.

The company has its operations based in the United States, the United Kingdom, Canada, Singapore, and Australia. Also, the Axis report pointed out that the company has some big names on its partner’s list, including Microsoft, Amazon Web Services, McAfee, IBM, PTC, and many more, to name a few.

Strong balance sheet and experienced promoters

Happiest Minds profit has grown 69% in the last three years from ₹22.47 crore in 2018 to ₹₹71.71 crore in 2020. The revenue has also climbed nearly 34% during the same period, which makes it an attractive bet for investors.

Source: Axis Capital

Although the IT sector is deemed to grow, what remains challenging is the cut-throat competition in the industry. “The key competitive factors in this industry include changing technologies, customer preferences and needs and the ability to rapidly deliver solutions supporting such evolving needs,” the Axis report said.

The report pointed out that the Indian IT firms like Infosys, Wipro, TCS, and Tech Mahindra, are also diversifying and showcasing their digital service offerings and to which Happiest Minds would have to continue fighting to maintain its place.

More than three-fourths of its revenue comes from the US, which means that like its peers, Happiest Minds is also exposed to currency risk. When there is a sustained rise in the value of the dollar against the rupee, the realisations improve and vice versa.

Right now, the dollar index (the value of the greenback against a basket of currencies) is near a 2-year low. "The trade-weighted dollar has fallen 7% from its March peak, and Goldman Sachs expects the dollar slide to reach 15% from the highs," HDFC Securities said in a report dated September 2. This could cloud the near-term growth prospects for Soota’s company, just like the other software exporters.

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