Happiest Minds IPO: Detailed Review
Happiest Minds Financials:
Happiest Minds Technologies Ltd which is a Bengaluru based IT services company decided to open its IPO on 7th September 2020 and it will continue for 3 days till 9th September 2020. IPO stands for Initial Public Offering, and it a process in which a company raises money from the public, by selling its stock to the general public. The price band of the Happiest Mind IPO is from Rs. 165 to Rs. 166 per equity share.
On 14th September, the allotment of the shares will be finalised for this IPO, and on 17th September the shares of Happiest Minds will be listed on the stock exchange. The issue size of Happiest Minds IPO is Rs. 702.02 crores. This issue contains two segments, one which is the IPO (Initial Public Offering) and the other which is OFS which is the Offer for Sale. Within this 702.02 crores, Rs. 110.00 crore is the IPO and Rs. 592.02 crore is the offer for sale.
Now, let us understand what an OFS and IPO mean here. In an IPO, the company issues new shares, and whatever they are getting after selling off the shares, the entire money goes under the company, which can be used for different purposes like expansion etc. But in the case for OFS or Offer for Sale the money raised, doesn’t go to the company. This money goes to the company’s existing promoters, shareholders who are selling off their shares through an offer for sale to the public. Just like this, out of the 702.02 crores of Happiest Minds issue size, 110.00 crores will go directly to the company and 592.02 crores will go the existing promoters and shareholders who are selling off their shares through an offer for sale to the public.
Services and Business of Happiest Minds:
Brightest Minds Technologies is a B2B company. B2B companies are those companies which directly deal with the businesses. The clients of Happiest Minds technologies are not individuals, but businesses. Happiest Minds Technologies mainly offer 3 services, digital business services, product engineering and services and lastly, infrastructure management and security services. In these three services also, Happiest minds provide with various segments of services.
Revenue from Different services:
Now let us see how much revenue is coming from these different services. From Digital Infrastructure, the company is gaining revenue of 43.7%; from software as a service they are gaining 23.6% revenue; from security solutions 7.6% revenue; from Artificial intelligence and analytics 12.1%; and from internet of things they are gaining 9.3%. This states that the company’s 97% of the business is a Digital business.
Happiest Minds consists of a total of 2600 employees, and as of June 2020, it had a total of 157 active customers. Company’s 48% of the revenue comes from its Top 10 customers.
Happiest Minds Technologies is a debt-free company, which is a positive thing. In the Fiscal year 2018, the company had a debt of 14 crores, and in the Fiscal year 2019, this debt reduced to 8.5 crores, and now it is 0. Revenue of Happiest Minds has grown immensely well for past 2 years. In Financial Year 2018, Happiest Minds revenue was 489 crores which grew at a height of 714 crores in 2020, a growth of 46% in seen over here.
Whereas, when we talk about their profit and loss, then Happiest Minds faced a loss of 22.4 crores in the Financial year of 2018. But then from the financial year 2019, the company became profitable with 14.2 crores, and in the financial year 2020, the company gained a profit of 71 crores.
In the financial year 2020-21, in the first quarter of April’20 to June’20, the company gained a profit of 50.1 crores. In this whole profit, 17 crores were the credit for the deferred tax, while removing this amount, a total of 33 crores was the profit which the company gained. Despite the coronavirus pandemic, the company is growing at a fantastic pace.
Around 77.5% of Happiest Minds business comes from the U.S, which states that a major amount of client comes from there. 11.9% of clientele business comes from India, 7.2% comes from the United Kingdom, and 3.4% from other countries. The employee cost in India is comparatively low as the U.S as its higher there.
Risk factors of Happiest Minds Technologies:
Every company carries some of the other risk factors. In the case of Happiest Minds, we will cover the aspect of Competition.
As mentioned above, 97% of Happiest Minds revenue comes from its digital business, whereas considering other IT companies, like Mindtree and Infosys they are producing revenue of 30% from digital business, but if they also plan to focus more on the digital business then there are chances that with this competition the market share of Happiest Minds might come down.
Another risk factor is the dependency on a limited number of customers. Now since we saw above that 48% of the revenue comes from its top 10 businesses, and in near future if any of these companies lost its revenue might have a major impact on the revenue line of Happiest Minds.
Now let us talk about the Positive factors of the company. If we look at the financials stated above we can see that for the past 2 years the growth of the company has been fantastic. But, just on the basis of its past 2 years growth one cannot properly evaluate the financial performance. This is the reason why one should also focus on its future performance. For this, one needs to closely analyse its quarterly performance.
Happiest Minds being a debt-free company is a good factor. The positive thing here is that the company’s promoter, Mr Ashok Soota, along with some other partners started Mindtree technologies, which now has a market capitalization of 20,000 crores. After successfully running Mindtree, he started with Happiest Minds, this shows that Mr Soota has extremely good experience of the market, and due to his immensely great reputation, the company is also getting valuable customers. This helped in the brand-building of Happiest Minds.
New Technological Innovations:
With different technologies coming up every other day, creating some technological innovations is a must for such companies. With IoT, BlockChain, Virtual Reality, Augmented Reality, Drones, Robotics etc, coming up as new technology, Happiest Minds found opportunity here and entered into this business as well. This shows the flexibility of the company, as they are always ready to grab on towards new opportunities coming on there way.
Recently, the company has started focusing on robotics and Drones. More than % of the company’s stake comes under Mr Soota and family. He is the executive chairman of the company. He is running the company in an excellent way, but he is of 77 years now, and this age factor should also be considered, as after him, who runs the management is efficiently important.
There are two types of people who invest in an IPO whenever a new IPO comes up. The first type of people are those who invest in IPO and then wait for the allotment of shares, and when those shares are listed in the stock exchange then they sell them off. The other type is those who buy shares in an IPO and hold them for the long term.
So in the first case here, there is a positive buzz going around due to Happiest Minds good financials and management. Due to which one should wait for the first two days and then by seeing the response on the 3rd day one should consider their decision. While considering the second case which is the long term investment part, we saw above that the valuation of the company is quite more as compared to the industry. And since we also saw that Happiest Mind has been profitable for the past 2 years only, so one cannot evaluate the financials of the company so soon, which is why quarterly performance is mandatory to check here.
Be sure to consider all these points before making an investment decision!!
Did you enjoy what you read? Subscribe to our newsletter and get content delivered to you at your fingertips!!