Latent View Analytics Limited - IPO Note

IT - Data Analytics

Latent View Analytics Limited - IPO Note

IT - Data Analytics

Price range
Rs. 190 – 197
Issue Period:
Nov 10, 2021
Nov 12, 2021
November 10, 2021

Stock Info

CNX Nifty
Face value (Rs.)
Market lot
Issue size
Rs. 600 cr.
Public Issue
3.045 cr. shares
Market cap post IPO
3,775 – 3,896 cr.
Equity Pre - IPO
17.37 cr.
Equity Post - IPO
19.78 cr.
Issue type
Fresh Issue and Offer for Sale

Shareholding (Pre IPO)

Source: Ace equity, StockAxis Research

Shareholding (Post IPO)

Source: Ace equity, StockAxis Research

One of the Leading, Pure-play Data Analytics Companies in India

Wide Range of Capabilities
The company brings skills, a wide range of capabilities, and experience in helping organisations to use the power of data and analytics across the spectrum of the business value chain. These include capabilities in:

  • Customer analytics that help organisations understand consumer perception and behaviour to enable personalization which aids in cross-selling and up-selling.
  • Marketing analytics related to brand and competitive positioning, campaign design and operations, marketing spend optimization, and attribution modelling.
  • Supply chain solutions that include assessing sourcing and replenishment requirements, metrics measurement, forecasting demand, and inventory optimization.
  • Finance and risk analytics, that include assessment of portfolio performance, collection analytics and trust/counterfeit analytics.
  • People/HR analytics that enable organisations in understanding employee pulse and retention trends, optimising talent acquisition and implementing performance-based compensation policies.

Clients Across Industries and Geographies
Latent partnered with many of the largest enterprises and have worked with over 30 Fortune 500 companies in the last three fiscals. Its client base is diversified across size, industry, and geography. It provides services primarily to companies in Technology, CPG and Retail, Industrials, and BFSI industries. The table below sets forth information on the company’s revenue by industry:

Particulars (Rs. in Crores) FY19 FY20 FY21 Q1FY22
Revenue % Revenue % Revenue % Revenue %
Technology 165.91 57.62% 187.08 60.28% 193.46 63.25% 58.68 66.81%
CPG & Retail 29.74 10.33% 25.83 8.32% 29.42 9.62% 11.98 13.64%
Industrials 38.16 13.25% 47.92 15.44% 53.66 17.54% 11.98 13.64%
BFSI 54.13 18.80% 49.53 15.96% 29.35 9.59% 5.19 5.91%
Total 287.93 100.00% 310.36 100.00% 305.88 100.00% 87.83 100.00%

Source: Company RHP

It has expanded range of offerings from basic services such as web analytics, activity-tracking reports, survey analytics to social media analytics, big data, cloud architecture and migration, and are currently engaged as a strategic partner to several clients. Latent has held relationships with top five clients by revenue for FY21, for an average of over six years as of Sep’21, and have evolved from being an analytics provider to a strategic thought leadership partner.

The following table sets forth revenue from operations by geography:

Particulars (Rs. in Crores) FY19 FY20 FY21 Q1FY22
Revenue % Revenue % Revenue % Revenue %
The United States 261.75 90.91% 286.56 92.33% 284.11 92.88% 83.26 94.79%
The United Kingdom 10.80 3.75% 5.53 1.78% 5.66 1.85% 0.06 0.06%
Netherlands 5.84 2.03% 8.78 2.83% 4.31 1.41% 1.68 1.91%
Rest of the World 9.55 3.32% 9.49 3.06% 11.80 3.86% 2.32 2.65%
Total 287.93 100.00% 310.36 100.00% 305.88 100.00% 87.83 100.00%

Source: Company RHP

Intends to Expand Client Base and Geographic Presence
Latent has gained access to new geographies through pilot projects that it carried out for existing and potential clients. Its continued presence in these geographies through subsidiaries has been driven by market opportunities in these countries and client referrals. The company intends to focus on acquiring new clients and expand presence globally on the back of these relationships and other evolving opportunities.

The analytics market in North America has grown at a CAGR of 16% in the last few years, and like most other developed markets, Canada is facing a significant shortage of analytics talent. Covid-19 pandemic has accelerated the demand for analytics as Canada’s traditional sectors of retail, banking and insurance have significantly accelerated their digital transformation requirements (Source: Zinnov Report). The growing market represents a potential opportunity for Latent as it intends to strengthen operations outside India (Particularly in Canada). It has identified Canada as an important and margin accretive market and has recently entered a strategic partnership with a recognised Canadian entity.

To Strengthen Global Position Through Select Inorganic Opportunities
Within the analytics application market, the investment in data and analytics is expected to grow within the BFSI, CPG & Retail industrial, at a CAGR of almost 20% over the next 5 years to exceed USD 110 billion by 2024 (Zinnov Report). Additionally, spend on supply chain analytics is expected to also increase at a CAGR of 19.8% from 2019 to 2024 (Source: Zinnov Report). The company proposes to leverage these opportunities and continue to pursue strategic expansion plans through inorganic opportunities.

It is exploring strategic acquisition opportunities that will enable it to gain access to new geographies, industries, and client base. The company continues to identify and evaluate prospects that can provide access to new technologies/IP, clientele, and those, which the company, believes to be synergetic with its existing operations. It intends to pursue opportunities that will complement its data engineering capabilities and help in building deeper capabilities in terms of AI/ML functions.


Risks and Concerns
Customer Concentration: The company derives a significant portion of revenue from its existing clients. Revenue from top five clients represented 59.3% and 54.0% for Q1FY22 and FY21, respectively. Amongst these, top three clients contributed ~44% and 41.6% of revenue in Q1FY22 and FY21, respectively. Its clients have no obligation to renew agreements after the terms of existing agreements expire.

Geography Concentration: It derives more than 90% of revenues from clients located in the United States and any adverse developments in this market could impact Latent view’s business.

Industry Concentration: The company’s revenue is highly dependent on a limited number of industry verticals and any decrease in demand for outsourced services in these industry verticals could impact materially impact its business (see the table below).

Particulars (% Revenue) FY19 FY20 FY21 Q1FY22
Technology 57.62% 60.28% 63.25% 66.81%
CPG & Retail 10.33% 8.32% 9.62% 13.64%
Industrials 13.25% 15.44% 17.54% 13.64%
BFSI 18.80% 15.96% 9.59% 5.91%
Total 100.00% 100.00% 100.00% 100.00%

Source: Company RHP

Highly Competitive Industry: The market for data and analytics is very competitive and it is expected to continue further. Certain competitors include Mu Sigma, Fractal, Tiger, Palantir, Accenture, TCS, and Capgemini. It can also face competition from emerging companies as well as established companies who have not previously entered the market.

Client Stickiness: It is observed from the data shared by the company in RHP that the number of clients in less than 10 crores category are declining and a few clients in 10 – 50 crores category have also declined (See the table below).

Number of Clients FY21 FY20 FY19
Less than Rs. 10 Crores 39 38 51
Between Rs. 10 – 50 Crores 5 9 7
Above 50 Crores 1 0 0

Source: Company RHP

EBITDA Margins May Normalise: As of FY21, the company’s adjusted EBITDA margin was 34.2% vs. 25.9% in FY20. The sharp increase in margins is mainly due to reduction in employee expenses and other expenses such as advertisement and sales promotion and travelling and conveyances. As the situation of Covid-19 pandemic is gradually normalising, some pressure on margins from FY21 levels is expected, if the company decides to gear up on these expenses.

Exchange Rate Risk: ~97% of the company’s revenue is generate from outside India, therefore, Latent View is exposed to the risks arising from exchange rate fluctuations.

Company Description

Latent View Analytics is a pure-play data analytics company based in India. The scope of work is classified into: (i) Consulting services, that involves understanding business trends, challenges, and opportunities and preparing a roadmap of data and analytics initiatives to address 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 the company develops to automate business processes, predict trends, and generate actionable insights.

It engages and provides services to blue chip companies in Technology, BFSI, CPG & Retail, Industrials, and others. It caters to the clients across countries in the United States, Europe, and Asia through subsidiaries in the United States, Netherlands, Germany, United Kingdom and Singapore, and sales offices in San Jose, London, and Singapore. As per the filings, the company has worked with over 30 Fortune 500 companies in the last three fiscal years and some of the key clients include Adobe, Uber Technology, and 7-Eleven.


Outlook and Valuation
Investors may gain in the long run by investing in Latent because it will be the only publicly traded pure-play data analytics company, which has been a trusted partner to multiple Fortune-500 companies in recent years. In our opinion, medium-to-long term industry tailwinds could also support Latent's growth, as investment in data and analytics is expected to grow at a CAGR of nearly 20% in the BFSI, CPG, and Retail industries over the next 5 years to exceed USD 110 billion, and spend on supply chain analytics is expected to grow at a CAGR of 19.8% from 2019 to 2024. A part of the net proceeds will be used to fund inorganic growth, which might allow Latent to expand into new geographies, industries, and client base. On the valuation front, the issue is reasonably priced at 38.6x FY21 diluted earnings at the upper price band of Rs. 197. We recommend to SUBSCRIBE to the issue on a long-term basis.

Key Information

Use of Proceeds:
The total issue size is Rs. 600 crores, of which Rs. 474 crores is fresh issue and balance (Rs. 126 crores) is OFS. The company will utilise the net proceeds from the fresh issue to fund inorganic growth, fund the working capital requirement of material subsidiary, investment in subsidiaries, and general corporate purpose (See table below).

Particulars (Rs. in Crores) Amount - Net Proceeds Estimated Use of Net Proceeds
FY22 FY23 FY24
Funding Inorganic Growth Initiatives 147.9 Over the three Calendar Year from Listing Date
Funding Working Capital Requirements of Latent View Analytics Corporation – The Material Subsidiary 82.4 38.1 17.3 27
Investment in the Subsidiaries to Augment their Capital Base for Future Growth 130 40 50 40
General Corporate Purposes - - - -

Source: Company RHP

Book running lead managers:
Axis Capital Limited, ICICI Securities Limited, and Haitong Securities India Private Limited.

Adugudi Viswanathan Venkatraman (Founder and Chairman), Pramadwathi Jandhyala (Co-Founder), Rajan Sethuraman (CEO), and Rajan Bala Venkatesan (CFO).

Financial Statement

Profit & Loss Statement:- (Consolidated)

Particulars (Rs. in Crores) FY19 FY20 FY21 Q1FY22
Revenue from Operations 287.93 310.36 305.88 87.83
Employee Benefit Expenses 174.30 197.95 177.24 50.40
Other Expenses 40.96 31.98 24.07 10.38
Total operating expenses 215.26 229.93 201.31 60.78
EBITDA 72.68 80.43 104.57 27.05
EBITDA Margin (%) 25.24% 25.91% 34.19% 30.80%
Depreciation and Amortization 7.09 6.66 6.87 1.77
EBIT 65.59 73.77 97.70 25.28
EBIT Margin (%) 22.78% 23.77% 31.94% 28.78%
Other Income 7.97 19.32 20.83 3.92
Other Income (% of Revenue) 2.77% 6.22% 6.81% 4.46%
Finance Cost 3.06 2.89 2.61 0.62
Profit Before Exceptional Items and Tax 70.51 90.19 115.92 28.57
Exceptional Items - - - -
Profit Before Tax 70.51 90.19 115.92 28.57
Tax Expenses 10.84 17.35 24.46 6.26
Effective Tax Rate (%) 15.37% 19.23% 21.10% 21.90%
Profit After Tax 59.67 72.85 91.46 22.31
PAT Margin (%) 20.72% 23.47% 29.90% 25.41%
Other Comprehensive Income 2.04 6.20 -2.12 1.39
Total Comprehensive Income 61.71 79.04 89.34 23.70
Diluted Earnings Per Share 3.26 3.99 5.10 1.25