Happiest Minds Technologies Ltd - IPO Review - ICICI Securities

Happiest Minds Technologies' (HMT) focuses on delivering a seamless digital experience to its customers. The company's offerings include, among others, digital business, product engineering, infrastructure management and security services. The company's capabilities include giving end-to-end solution in the digital space. HMT has repeat business from its customer base, which includes more than 35 Fortune 2000/Forbes 200/billion dollar corporations. The company's broad range of offerings helps to up-sell while multiple business units (BUs) help it to cross-sell to existing customers as well as to acquire new customers. Its average revenue per customer has increased from US$471,472 in FY18, to US$501,562 in FY19 to US$614,675 in FY20. The company's total income & EBITDA has grown at a CAGR of 20.8% and 285.3%, respectively between FY18 and FY20.

Investment Rationale

Strong brand in digital IT services

The global enterprise digital spend is expected to be ~US$691 billion in 2019 and is expected to grow to US$2,083 billion by 2025 at a CAGR of 20.19%. In FY20, 96.9% of revenues came from digital services. This is one of the highest among Indian IT companies. Broadly, the company's target market includes business services, IT services, infrastructure-as-a-service, applications, application development and deployment. HMT's brand positioning "Born Digital. Born Agile" is a reflection of digitisation being built into the essence of its business.

Acquire new accounts, deepen key account relationships

Over the years, HMT has developed long standing relationships with customers. The company gives significant attention to being able to understand the behaviour, preferences and trends of customers through research and a consultation process. It believe that this gives a distinct perspective that HMT bring to engagements. With this approach, it aims to become a key part of the customer's operating and growth strategy, enabling HMT to serve customers across multiple touchpoints and projects. Expansion of relationships with existing active customers will remain a key strategy, going forward, as the company continues to leverage domain expertise and knowledge of emerging technology trends to drive incremental growth for business.

Priced at P/E of 31x FY20 on upper band

At the higher end of the price band of Rs. 166, the stock is available at a PE of ~31x on FY20 diluted EPS.

For details, click on the link below: https://www.icicidirect.com/mailimages/IDirect_HappiestMinds_IPOReview.pdf

Source : Equity Bulls

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