Grey market premium of Happiest Minds shoots up 75% ahead of IPO

The IPO by the digital transformation IT consulting and services company would include a fresh issue of Rs 110 crore and an offer for sale of up to 35,663,585 equity shares by promoters.

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Abhay Doshi, an independent dealer from unlisted shares, said the company ticks all the checkboxes of being a growth pick. “This is a stock for the portfolio, and not just listing gains. The retail portion is very less leading to the buzz,” he said.
New Delhi: Grey market is buzzing as Happiest Minds Technologies readying to hit the market with its initial public offering on September 7. The issue can be subscribed till September 9.

The grey market premium on the issue has risen by Rs 115-125 per share over the IPO price band of Rs 165-166 per share.

The IPO by the digital transformation IT consulting and services company would include a fresh issue of Rs 110 crore and an offer for sale of up to 35,663,585 equity shares by promoters.


Strong and experienced promoters, along with a niche business model and exponential growth prospects are the prime reasons cited for the hefty premium in grey market, said dealers in the unofficial market for unlisted shares.

Narottam Dharawat of Dharawat Securities, a Mumbai-based firm that deals in unlisted market, said the niche business model eliminates competition. “Such firms enjoy the pricing power hands down,” he said.

Ashok Soota, promoter of Happiest Minds, was the founder of midcap IT firm Mindspace, which was later taken over by Larsen & Toubro group. The industry veteran previously had a long stint in Wipro from 1984 to 1999.
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According to a report from Axis Capital, Happiest Minds’ business is divided into the three business units: Digital Business Services (DBS), Product Engineering Services (PES) and Infrastructure Management & Security Services (IMSS).

Its business units are supported by three centres of excellence, including Internet of Things (IoT), Analytics/Artificial Intelligence (AI) and Digital Process Automation (DPA). As of June 30, 2020, Happiest Minds had 148 active customers.

As much as 97% of the company’s revenue comes from digital, which is much higher than peers Infosys, Cognizant and Mindtree, where the average contribution from digital stands at 40-50%. “Digital is growing much faster than traditional business,” Soota said in a virtual media briefing.

Off-market dealers find it a ‘value’ buy. The small size of the issue is another factor contributing to euphoric response in the grey market. They find the issue fairly priced.
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Abhay Doshi, an independent dealer from unlisted shares, said the company ticks all the checkboxes of being a growth pick. “This is a stock for the portfolio, and not just listing gains. The retail portion is very less leading to the buzz,” he said.

Investors can bid for a minimum of 90 shares and in multiples of 90 equity shares thereafter. The face value of the equity shares is Rs 2 per share.
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The company’s revenues for FY20 stood at Rs 714.2 crore growing at a CAGR of 20.8% between FY18 and FY20. Revenues for the first quarter ended March stood at Rs 187 crore.

Vinit Bolinjkar, Head of Research at Ventura Securities, said the company is active in the high growth digital business. “Flourishing work from home and thrust of cost cutting measures will add to prosperity of the business,” he said.

He said post equity dilution, the stock will be available at a P/E multiple of 12.7, which is quite cheap compared with its listed peers. Bolinjkar gave a ‘subscribe’ rating to the issue.

ICICI Securities and Nomura Financial Advisory and Securities (India) are the book running lead managers to the issue while KFin Technologies is the registrar.
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