L&T Infotech IPO to open on July 11: 10 things you should know

Mumbai-based IT services provider Larsen & Toubro Infotech, the subsidiary of engineering and construction major L&T , will open its 1.75 crore shares initial public offer on July 11. The price band is fixed at Rs 705-710 per share.

It is an offer for sale issue, so the promoter and founder L&T will receive entire IPO proceeds of around Rs 1,200 crore. Post IPO, L&T's stake will be reduced to 84.7 percent from currently around 94.94 percent.

Retail investors will get a discount of Rs 10 per share on IPO price. The issue will close on July 13.

Here are 10 things you should know before subscribing for the IPO: Incorporated in 1996, L&T Infotech with revenue of USD 887 million is the sixth largest IT services company in India. It has strong brand name of L&T, the parent company. It benefits from the expertise and experience of the L&T group in verticals such as hydrocarbons, heavy engineering, oil and gas and automotive and aerospace. This assists the company in developing and delivering IT services and solutions that benefit its clients in these verticals and differentiates L&T Infotech from its competitors.

L&T Infotech's substantial business comes from the US region that contributed 69 percent to revenue (followed by Europe with 17 percent). It has only 2 percent exposure to UK, hence analysts see minimal impact of volatility caused by Brexit.

Top client contributed nearly 15 percent to revenue and top 10 clients contributed 50 percent of revenue reported in the financial year gone by. It's client retention is high as it has 96.9 percent of revenue from repeat business in FY16 against 98.1 percent in FY15 and 96.9 percent in FY14.

It operates in diverse industries such as banking and financial services (26.3 percent to total revenue), insurance (20.7 percent), energy and process (12.7 percent), consumer packaged foods, retail and pharma (9.3 percent), media and entertainment (6.2 percent), hi tech and consumer electronics (5.2 percent), automotive and aerospace (6.8 percent). It has presence in fast growing areas like digital, IMS and testing which contributed over 30 percent to total revenue in FY16.

It has high dividend payout policy, with payout of over 75 percent in the last three years.

The company earned profit of Rs 922.2 crore (up nearly 20 percent over FY15) on revenue of Rs 5,847.1 crore (up over 17.5 percent over FY15) in FY16. Its dollar revenue stood at USD 887 million during the year.

It has reported CAGR (compounded annual growth rate) of 9 percent in USD revenue over FY14-FY16 despite a weakness in energy vertical (that contributed 12 percent to revenue). Constant currency dollar revenue growth in FY16 stood at 13.8 percent. Digital revenue reported more than 30 percent CAGR in FY13-16. Operating profit margin contracted sharply from 28.1 percent in FY14 to 17.7 percent in FY16 on account of steep fall in gross margin, which is materially lower than closest peers like Infosys (27.2 percent), TCS (28.2 percent) and HCL Tech & Wipro (21 percent each).

Key management personnel: CEO and Managing Director Sanjay Jalona has over 25 years of experience in the IT industry. Chief financial officer AK Sonthalia is a chartered Accountant with over 24 years of experience. Chief operating officer Aftab Ullah has over 20 years of experience in the IT industry.