L&T Technology Services IPO Set To Hit Primary Markets

Another technology company from the L&T stable is making its capital market debut. However, unlike the previous offering of L&T Infotech, which is a pure play IT services company, L&T Technology Services (L&TTS) is a niche technology player in engineering research and development domain offering product related engineering services.

Parent L&T is offering up to 10,400,000 shares in an offer for sale with a face value of Rs 2. The offer constitutes around 10.2 percent of the post-offer paid up equity.

The company operates in five verticals such as transportation, industrial products, telecom and hi-tech, process industry and medical devices. Bankers to the issue were quite optimistic citing that engineering heads were the key decision makers on these kind of IT budgets.

Nimesh Kampani of JM Financial said: "Normally, IT services budgets are controlled by chief technology officers. But this company is really an IT engineering research and development company. The budget for this type of services is controlled by the manufacturing personnel. Therefore, one cannot compare this as run-of-the-mill technology company."

Kaku Nakhate of BofAML India concurred that the IPO offers a unique opportunity to participate in a world class engineering R&D services company, and that cannot be compared to other technology companies in the same breadth.

Over the last three years, the company has built a list of marquee clients its working with to provide engineering and product technology services. Kumar Prabhas, chief operating officer, L&TTS said: "We do not want to be with tied with the fortunes of one industry and a diverse portfolio helps us see through any cyclicality associated with any of the industry."

L&TTS has 135 patents along with its clients, and 34 of its own patents. Prabhas said: "It is not just about monetizing the patents, if we generate patents like we have and drive innovation, the client is no more going to go to other companies, and our renewals become pretty automatic."

The company has stated that the addressable market for these kind of services is about $1 trillion of which about $20 billion is being done out of the subcontinent.

A.M. Naik, non-executive chairman, L&TTS: "We have capabilities in advanced manufacturing, and If look at the L&T's profile in high-tech, it is really just not there in this part of the world, let alone India. We believe that leveraging IT and of engineering business are of great importance to L&T's core business."

In FY 2016, the company reported consolidated revenues of Rs 3,066.5 crores, while it reported a net profit of Rs 416.6 crore for the same period.

The issue opens for all categories on September 12 at a price band of Rs 850-860. The offer will close on Thursday, September 15.

At the offer price, the company's market value amounts to about Rs 8500 crores.
L&T Infotech listed below its offer price of Rs 710, and is currently quoting at Rs 652, nearly 8 percent lower.