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L&T Technology IPO gets off to a slow start

12 September, 2016

The initial public offering (IPO) of L&T Technology Services Ltd got off to a slow start with just under a fifth of the issue covered at the end of day 1, stock exchange data shows.

The research unit of Larsen & Toubro Ltd (L&T), India’s biggest engineering firm, saw institutional and retail investors come forward while corporates and high net-worth individuals played the wait and watch game. Overall, around 18% of the issue was covered at the end of first day.

Institutional investors bid for 27.8% of the issue reserved for them while retail investors applied for 19% of their portion.

Corporates and HNIs barely picked 2% of their portion. But they usually join in on the last day of IPOs and there L&T Technology would hope that this set of investors are not swayed much by the volatility in the secondary market.

Indian benchmark stock indices fell on Monday as investors feared a US interest rate hike soon. 30-stock Sensex fell 1.54% to end at 28,353.54.

Last Friday, L&T Technology raised Rs 268.32 crore ($40 million) from anchor investors including mutual funds and foreign portfolio investors at the upper end of the Rs 850-860 a share price band.

The firm is seeking a valuation of as much as Rs 8,745 crore ($1.3 billion) in the issue where L&T is selling 1.04 crore shares, or a 10.2% stake.

L&T Technology will be the fourth group firm to list on stock exchanges. Parent L&T has been a public firm for decades while the group’s financial services arm, L&T Finance Holdings Ltd, floated its IPO five years ago.

In July, another Larsen unit, L&T Infotech Ltd floated its IPO. The public issue of the software services unit was covered 11 times but it made a tepid debut on its listing day and has fallen further since then.

L&T Technology had filed its draft red herring prospectus with the Securities and Exchange Board of India (SEBI) in July. It received the regulator’s approval for the public issue recently. 

It offers R&D solutions for industries such as industrial products, transportation, aerospace and telecom. It also offers services in areas such as mechanical engineering, embedded systems, besides proprietary solutions in engineering data analytics, and the Internet of Things (IoT). 

The company was set up in January 2014 by carving out the product engineering services segment from L&T Infotech. The integrated engineering business from L&T was then transferred to the new entity in April 2014.

L&T Technology reported Rs 2,894 crore revenue from operations for the financial year ended 31 March 2016, up 13% from Rs 2,560 crore a year before. Net profit rose to Rs 434.2 crore from Rs 315.2 crore.

The issue is being managed by JM Financial, Kotak Investment Bank, Bank of America Merrill Lynch and SBI Capital Markets.

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L&T Technology IPO gets off to a slow start

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