Latent View Analytics IPO Fundamental Analysis (Subscribe)

Incorporated in the year 2006 in Chennai, Latent Analytics is a data analytics services company engaged in service offerings from data and analytics consulting to business analytics and insights, advanced predictive analytics, data engineering, and digital solutions.

The Issuer provides services primarily to companies in Technology, CPG and Retail, Industrials, and BFSI industries. It has emerged as one of the most trusted partners to several Fortune 500 companies in recent years and has worked with over 30 Fortune 500 companies in the last three Fiscals. Some of the Issuer’s key clients include Adobe, Uber Technology, and 7-Eleven.

Latent Analytics has clients based in the United States, Europe, and Asia through its subsidiaries in the United States, Netherlands, Germany, United Kingdom, and Singapore, and sales offices in San Jose, London, and Singapore. In Q1FY21 and Q1FY20 and in fiscal 2021, 2020 and 2019, revenue from operations US contributed 94.79%, 91.69%, 92.88%, 92.33% and 90.91% respectively.

Services offered:

Consulting services- It involves understanding business trends, challenges, and opportunities and preparing a roadmap of data and analytics initiatives that addresses them;
Data engineering- To design, architect, and implement the data foundation required to undertake analytics.
Business analytics- that delivers analysis and insights for clients to take accurate, timely, and impactful decisions.
Digital solutions- that are developed to automate business processes, predict trends, and generate actionable insights.

The top five clients in FY21 and in Q1FY21 contributed 54.00% and 59.31% of revenue from operations. Revenue from operations from clients for over five years contributed 44.51%, 42.42%, 55.27%, 67.51%, and 79.76%, of revenue from operations in Q1FY21, Q1FY20 and in FY21, FY20, and FY19 respectively.

The Issuer provides predictive and prescriptive analytics services by leveraging AI/ ML and advanced analytics techniques to help clients better understand their commercial relationships and make informed decisions with a more holistic view of the business. A business-focused approach to analytical problem solving, guides the enterprises in the adoption of updated scalable architectures to provide insights in real-time to aid decision making.

Issue Details

Latent View Analytics Limited IPO amounting to Rs 600 crore (Rs 474 crore fresh issue) opens on Nov 10, 2021. The price band is Rs 190-196 per share. BRLM to the offer is Axis Capital, Haitang Securities, and ICICI Securities. The Issue closes on Nov 12, 2021, and would list on 22^nd Nov on BSE and NSE. The minimum lot size is 76 shares amounting to Rs 14,972. The proceeds would be utilized to fund the inorganic growth initiatives (Rs 147.90 crore) and to fund the working capital requirements (Rs 82.40 crore) and investments in subsidiaries (Rs 130 crore) to augment their capital base.

Financial Review of Latent View Analytics

Total revenues for FY21 were Rs 326.71 crore as against Rs 329.67 crore in FY20. The revenues reduced slightly due to the decrease in revenue from clients in the United States owing to the pandemic. Latent Analytics posted a PAT of Rs 91.46 crore in FY21, showing an increase of 25% from Rs 72.85 crore in FY20 due to a decrease in the operating expenses. The profitability margins have been strong for all the last three fiscals as can be seen from the table below.

Table 1 - Financials and Ratios (Amount in Rs Crore)
Title	Q1FY22	FY2021	FY2020	FY2019
Total Revenue	91.74	326.71	329.67	295.9
Other income	3.92	20.83	19.32	7.97
PAT	22.31	91.46	72.85	59.67
EBITDA	30.96	125.40	99.74	80.66
Total Assets	588	519.2	397.85	323.68
Cash & cash equivalent	179.12	135.08	74.99	46.91
EBITDA Margin	33.75%	38.38%	30.25%	27.26%
Net Margin	24.32%	27.99%	22.10%	20.17%

Return on net worth has been 20.89%, 20.94%, and 22.36% for the last three fiscals. The debt of the Issuer is negligible.

Valuation and peer comparison

The Issue is priced at 37.69x with annualized EPS of 5.20 calculated at the upper price band of Rs 196 per share. With NAV of Rs 27.02 as of 31^st Mar 21, price to book value is 7.65 at Rs 196 per share. Happiest Minds is listed as its peer as per the RHP in the listed space, its P/E is 118.02. The valuation appears attractive when compared to its peer, though it should be noted that Happiest Minds revenues are more than twice of Latent.

Conclusion and Investment Strategy

The Issuer utilizes the power of data and analytics across the spectrum of the business value chain. These include capabilities in:

Customer analytics to understand consumer perception and behavior.
Marketing analytics related to brand and competitive positioning, predict evolving consumer trends with greater accuracy and improve consumer engagement.
Supply chain solutions to assess sourcing and replenishment requirements, forecasting demand, and inventory optimization.
Finance and risk analytics to include assessment of portfolio performance, collection analytics
People/ HR analytics to enable organizations to understand employee pulse and retention trends, optimize talent acquisition, and implement performance-based compensation policies.

The challenge that the Issuer faces is in the form of revenue concentration risk as the majority of its clients are in the US and they contribute a large proportion of revenues. However, looking at the overall sector and the immense demand for analytics, these services are required by enterprises to guide business strategy and optimize spending decisions amid growing financial uncertainties.

Further strong operating and financial profile makes it appear good for a long-term bet. Hence one may subscribe to the IPO.

Reviewer recommends Subscribe to the issue.

Review By CA Priyanka Choudhary on 31st Oct 2021

Review Author

About CA Priyanka Choudhary

CA Priyanka Choudhary, a freelance chartered accountant

Priyanka Choudhary Jain is a Chartered Accountant and an experienced credit analyst. She has worked with CRISIL as Senior Credit Analyst on ratings assignments including business and financial analysis in Corporates as well as the Public Finance Sector.

Email: [email protected]

DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Investors should bear in mind that any investment in stock markets are subject to unpredictable market related risks. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.