Latent View Analytics
Latent View Analytics is coming out with a 100% book building; initial public offering (IPO) of 3,15,78,946 shares of Rs 10 each in a price band Rs 190-197 per equity share.
Not less than 75% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not more than 15% of the issue will be available for the non-institutional bidders and the remaining 10% for the retail investors.
The issue will open for subscription on November 10, 2021 and will close on November 12, 2021.
The shares will be listed on BSE as well as NSE.
The face value of the share is Rs 10 and is priced 19 times of its face value on the lower side and 19.70 times on the higher side.
Book running lead manager to the issue are Axis Capital, ICICI Securities and Haitong Securities India.
Compliance Officer for the issue is Kesavan VR.
Profile of the company
The company is among the leading pure-play data analytics services companies in India, based on its expertise of the entire value chain of data analytics from data and analytics consulting to business analytics and insights, advanced predictive analytics, data engineering and digital solutions. Across industries, data and analytics are being leveraged by enterprises to guide business strategy and optimize spending decisions amid growing financial uncertainties. It engage and provide services to blue chip companies in Technology, BFSI, CPG & Retail, Industrials and other industries. It has emerged as one of the most trusted partners to several Fortune 500 companies in recent years (Source: Zinnov Report), and have worked with over 30 Fortune 500 companies in the last three Fiscals. Some of the key clients that it work include Adobe, Uber Technology and 7-Eleven.
As an analytics provider with capabilities across business functions, it engage with several key stakeholders within its client organizations, including CFOs for finance and risk analytics, CMOs for marketing insights, CHRSs for HR analytics, CSCO for supply chain analytics, further strengthening its client relationships across multiple touchpoints. The company’s scope of work is classified into: (i) Consulting services, that involves understanding relevant business trends, challenges, and opportunities and preparing a roadmap of data and analytics initiatives that addresses them; (ii) Data engineering, that is undertaken to design, architect and implement the data foundation required to undertake analytics; (iii) Business analytics, that delivers analysis and insights for clients to take more accurate, timely and impactful decisions; and (iv) Digital solutions that it develop to automate business processes, predict trends, and generate actionable insights.
Proceed is being used for:
Funding inorganic growth initiatives.
Funding working capital requirements of LatentView Analytics Corporation, Material Subsidiary.
Investment in subsidiaries to augment their capital base for future growth.
General corporate purposes.
Industry overview
The global IT spend is expected to recover to reach approximately $4 trillion by 2024. While business related uncertainties led to enterprises putting large scale expansion plans on hold in 2020, investments on IT have since then recovered as businesses prepare for the next wave of growth supported by a buoyant economy. However, as enterprises prepare for a post COVID-19 future, IT spending priorities are expected to change. In the pre-pandemic era, technology leaders across industries were accustomed to incremental increases in IT budgets, with almost 60% of the budget in 2019 spent on legacy applications such as outdated architecture and software components that were harder to integrate with newer systems. While most enterprises were focused on prioritizing cost and efficiency initiatives, a few of them invested in digital initiatives such as Analytics, Cloud-based enterprise applications, and customer experience technologies like Artificial Intelligence, Augmented Realities, for driving innovation, growth, and improved customer experience.
The COVID-19 pandemic has led to a digital divide – enterprises that had invested in digital initiatives were better placed compared to the others. Consequently, technology leaders across industries are undertaking efforts to minimize the spend on maintenance of legacy applications, and rapidly scaling up investments in digital technologies to fuel growth. As a result, growth in IT spend is expected to be largely driven by investments in digital technologies as enterprises scale up digital transformation efforts across business units. Investment in digital technologies is expected to double from 2020 levels to approximately $2.4 trillion in 2024. The global Enterprise Data Management (EDM) spending is expected to grow from approximately $64 billion in 2020 to $92 billion by 2024 at a CAGR of approximately 10%. In recent years, the growing volume of unstructured data has introduced challenges in data management across industries. Moreover, the increasing number of data sources in BFSI and CPG & Retail further increases the complexity of data management. As a response, BFSI and CPG & Retail verticals are expected to continue investment in EDM services for consolidation of unstructured data generated. EDM spending in Industrial and Healthcare verticals is also expected to grow due to increased adoption of various devices for smart manufacturing and remote patient monitoring respectively.
Pros and strengths
Recognized leadership position in data and analytics with wide range of capabilities: The company is among the leading pure-play data analytics companies in India and has emerged as one of the most trusted partners to several Fortune 500 companies in recent years. It has extensive experience across a range of data and analytics capabilities, which it leverage to serve various Fortune 500 companies across the value chain. This helps enhance their operational efficiencies and revenue generation capabilities. Its portfolio offers a distinctive breadth and depth of capabilities, including descriptive analytics and prescriptive analytics with intuitive and personalized dashboards that can drive monetization by improving sales and marketing efficiency, improving customer experience and operational efficiency. Functional expertise is the foundation of its operations, and combining its functional expertise with business knowledge, expertise in quantitative methods, and data management helps it provide end-to-end business solutions.
Consistent client driven innovation: The company’s end-to-end solutions cover a comprehensive spectrum of use cases across the value chain of its clients’ businesses. These use cases continue to evolve as it finds additional ways to derive insights from data. Its customized solutions are a key competitive advantage for it and allow it to effectively compete across the entire commercial data and analytics landscape. It uses a consultative approach wherein developers, analysts, and nontechnical users collaborate to make data-driven decisions. These data-driven decisions are often written back into decision systems to be analysed and modelled for improved future understanding and decisions, creating an operational feedback loop. It prioritizes innovation and R&D through multiple initiatives, through a combination of solutions it design as responses to client requests, as well as proactive efforts to identify marketable solutions. It carry out client driven innovation through its Service Delivery Excellence (SDE) framework that supports a cycle of continuous improvement through context-based improvement studies, and have set-up ‘IdeaLabs’, a team of dedicated R&D resources, for its ongoing innovation efforts.
Scalable and attractive financial profile: The company’s business model is supported by stable and recurring revenues, significant operating leverage and low capital requirements that contribute to a healthy free cash flow. Its high levels of client retention and shift toward multi-year engagement contracts result in a high degree of revenue visibility. It operate through different types of client arrangements as follows: (i) long-term managed services agreements that typically have a term of over one year and under which it supplement the client’s existing capabilities in terms of workforce; (ii) project based fixed fee contracts, typically short-term with project durations of a few months; (iii) consulting engagements that are typically short-term and under which clients seek a specific solution to a complex problem; and (iv) solution based arrangements.
Strong leadership team guiding capability: The company’s growth and culture of innovation has been fostered by the entrepreneurial spirit of its promoters and experienced senior management. Its Chairman, Adugudi Viswanathan Venkatraman, has several years of experience in the across IT services, credit analysis and business consulting and its co-founder Pramadwathi Jandhyala has several years of experience in corporate finance, and credit ratings. Together, its Promoters have been instrumental in establishing and growing its analytics capabilities. It is supported by its senior management team that has a track-record of strong performance and significant expertise in the markets it serve and in developing similar businesses.
Risks and concerns
Derive more than 90% of revenues from clients located in United States: The company has historically derived more than 90% of its revenues from operations from clients located in the United States of America. The company’s revenues from the United States may decline as a result of increased competition, regulatory action, pricing pressures, fluctuations in the demand for or supply of its services, or the outbreak of an infectious disease such as COVID-19. Its failure to effectively react to these situations or to successfully introduce new services could adversely affect its business, prospects, results of operations and financial condition. Further, international operations are subject to risks that are specific to each country and region in which it operate, as well as risks associated with international operations, in general. These risks include complying with changes in foreign laws, regulations and policies, including restrictions on trade, import and export license requirements, and tariffs and taxes, intellectual property enforcement issues and changes in foreign trade and investment policies.
Business depends on company’s ability to remain updated with new technologies: The company’s success has been based on its ability to remain updated with the latest technologies and effectively use them to enable the integration of data into a common operating environment to facilitate advanced data analysis, knowledge management, and collaboration. It spends substantial amounts of time and money researching and developing ways to use evolving technologies to meet its clients’ and potential clients’ rapidly evolving needs. There is no assurance that the enhancements it make to its offerings or service features, or capabilities, will be successful in deriving more accurate data-driven decisions for its clients or gain market acceptance. If its services do not deliver reliable results, or if it fails to introduce services that meet client preferences in a timely and cost-effective manner, it may fail to retain its existing clients or increase demand for its services.
Face intense competition: The markets for data and analytics is very competitive, and it expect such competition to continue or increase in the future. A significant number of companies are offering services that currently, or in the future may, compete with some or all aspects of its analytics services. It may not be successful in convincing the management teams of its potential clients to engage its services to enhance their operations or to prefer its services over those of its competitors. Certain of its competitors include Mu Sigma, Fractal, Tiger, Palantir, Accenture, TCS and Capgemini. In addition, its competitors include large enterprise software companies and system integrators, and it may face competition from emerging companies as well as established companies who have not previously entered this market.
Revenues highly dependent on limited number of industry vertical: The company’s business growth largely depends on continued demand for its services from clients in these industry verticals. A downturn in any of its targeted industry verticals, a slowdown or reversal of the trend to outsource data and analytics services in any of these industries or the introduction of regulations that restrict or discourage companies from outsourcing could result in a decrease in the demand for its services and adversely affect its business, financial condition and results of operations. Other developments in these industries may also lead to a decline in the demand for its services in these industry verticals, and it may not be able to successfully. Further, its clients may experience rapid changes in their prospects, substantial price competition and pressure on their profitability. This, in turn, may result in increasing pressure on it from clients in these key industries to lower its prices, which could materially adversely affect its business, financial condition and results of operations.
Outlook
Latent View Analytics provides analytics services such as data and analytics consulting, business analytics & insights, advanced predictive analytics, data engineering, and digital solutions. The company provides services to blue-chip companies in Technology, BFSI, CPG & Retail, Industrials, and other industry domains. The company classifies its business into - (i) Consulting services, which involves understanding relevant business trends, challenges, and opportunities and preparing a roadmap of data and analytics initiatives that addresses them; (ii) Data engineering, to design, architect, and implement the data foundation required to undertake analytics; (iii) Business analytics, which delivers analysis and insights for clients to make more accurate, timely and impactful decisions; and (iv) Digital solutions which the company develops to automate business processes, predict trends and generate actionable insights. The company prioritizes innovation and R&D through multiple initiatives, through a combination of solutions it design as responses to client requests, as well as proactive efforts to identify marketable solutions. On the concern side, the company’s profitability is significantly impacted by its utilisation levels of fixed-cost resources, including human resources as well as other resources such as office space, and its ability to increase its productivity levels. As part of its growth strategy, it may invest in or collaborate with and acquire stake in companies that are complementary to its business and offerings. There can be no assurance that such investments and acquisitions will achieve their anticipated benefits.
The issue has been offered in a price band of Rs 190-197 per equity share. The aggregate size of the offer is around Rs 600 crore to Rs 622.10 crore based on lower and upper price band respectively. On the performance front, total income decreased marginally by 0.90% from Rs 3,296.72 million in Fiscal 2020 to Rs 3,267.08 million in Fiscal 2021 primarily due to (i) non-renewal of certain existing client assignments, specifically in connection with a client engaged in the travel and hospitality industry that was severely affected by the COVID-19 pandemic; and (ii) reduced volume of business from existing clients, on account of initial budget reconsiderations by enterprises due to the uncertainties surrounding the COVID19 crisis. The company earned a profit for the year of Rs 914.63 million in Fiscal 2021 compared to Rs 728.45 million in Fiscal 2020. The company intends to identify and expand its network of partners and build and capitalize on these partnerships to further drive growth of its operations. It intends to adopt a focused go-to-market strategy to gain visibility among potential clients and strengthen engagements with existing clients, on the back of such partnerships. It will continue to invest in client acquisition measures to drive efficient acquisition of new clients, including by ramping up sales efforts to pursue opportunities outside India.
