Software services company Happiest Minds Technologies Ltd raised Rs 315.9 crore ($43.13 million) from a bunch of anchor investors that include Singapore sovereign wealth fund GIC Pte Ltd ahead of its initial public offering.
Hedge funds and public markets funds managed by Avendus Capital, Sumeet Nagar-led Malabar Investments and IIFL Asset Management Ltd also took part in the anchor allotment, stock-exchange data showed.
Bengaluru-based Happiest Minds, which is backed by private equity investor JP Morgan CMDB II, allotted a little more than 19 million shares at the upper end of the Rs 165-166 per share price band to 25 institutional investors.
GIC bought shares worth Rs 18 crore. The Avendus Absolute Return Fund and Malabar each subscribed to shares worth Rs 7.6 crore.
IIFL’s Special Opportunities Fund (Series 5), which typically makes public market or pre-IPO bets, also bought shares worth Rs 7.6 crore.
Anchor investors, also known as cornerstone investors, are institutions that accept a one-month lock-in for a sizeable allocation of shares. Their participation highlights investors’ confidence in an IPO and sets a benchmark for the investor community at large.
Kuwait Investment Authority (KIA), the West Asian nation’s sovereign wealth fund with nearly $600 billion in assets, bought Happiest Minds shares worth Rs 16 crore.
Other investors included Goldman Sachs India, Fidelity Asian Values Plc and Integrated Core Strategies Asia Pte Ltd.
Indian asset managers that subscribed to Happiest Minds’ shares are Axis Mutual Fund, ICICI Prudential, Aditya Birla Sun Life Mutual Fund, Franklin Templeton Mutual Fund, L&T Mutual Fund, SBI Mutual Fund and Sundaram Mutual Fund.
India life insurers that participated in the anchor allotment included HDFC Life Insurance, Aditya Birla Sun Life Insurance, SBI Life Insurance and Max Life Insurance.
Happiest Minds’ IPO opens on Monday and closes two days later. The company is targeting a valuation of as much as Rs 2,438 crore through the IPO that comprises a fresh issue of shares worth Rs 110 crore and an offer for sale of shares worth up to Rs 592 crore by the company’s founder Ashok Soota as well as JP Morgan CMDB II.
JP Morgan CMDB II will exit its over five-year investment in the company with handsome returns, VCCircle reported in June after the company filed its draft red herring prospectus with the capital markets regulator.
The IPO will result in 28.79% stake dilution on a post-issue basis. Soota's stake will fall to 40.89% after the IPO from 48.83% at present.
Soota has been executive chairman and promoter of Happiest Minds since August 2011. Prior to Happiest Minds, he was founding chairman and managing director of Mindtree (1999-2011). He was also president of Wipro’s technology business from 1984 to 1999, his LinkedIn profile shows.
At least 75% of Happiest Minds’ IPO is reserved for institutional investors, or qualified institutional buyers (QIBs), owing to its past three-year profitability track record. In a typical IPO, at least 50% of shares are reserved for QIBs 35% is for retail investors and 15% for non-institutional non-retail investors such as corporate bodies and high net-worth individuals.
The company turned profitable in 2018-19 with a net profit of Rs 14.2 crore on revenue of Rs 590.4 crore. It had reported a loss of Rs 22.5 crore for the year ended March 2018 on revenue of Rs 463 crore. Its consolidated net profit for 2019-20 jumped to Rs 71.7 crore on revenue from operations of Rs 698 crore.
Happiest Minds will use about Rs 101 crore of the net fresh proceeds towards long-term working capital and the remaining portion for general corporate purposes. The proceeds from the secondary sale will go to the selling shareholders.
ICICI Securities and Nomura Financial Advisory and Securities (India) Pvt. Ltd are the merchant bankers arranging the share sale.