All You Need To Know About Ashok Soota’s Happiest Minds IPO
People working on laptop computers. (Photographer Victor J. Blue/Bloomberg)

All You Need To Know About Ashok Soota’s Happiest Minds IPO

Happiest Mind Technologies Ltd. will launch its initial public offer on Monday, the third listing since the coronavirus pandemic disrupted the economy, as promoter Ashok Soota and investors look to pare holding.

The mid-sized information technology company plans to raise Rs 702 crore by selling up to 4.23 crore shares at Rs 165-166 apiece, according to its red herring prospectus. The IPO consists of a fresh issue and an offer-for-sale—promoter Soota and investor JPMorgan’s private equity entity CMDB II selling 0.84 crore and 2.72 crore shares, respectively.

  • Issue opens on: Sept. 7, 2020
  • Issue closes on: Sept. 9, 2020
  • Face value: Rs 2 apiece
  • Fresh issue: 0.67 crore shares
  • Offer-for-sale: 3.56 crore shares
  • Listing on: NSE, BSE
  • Minimum Bid: 90 shares (and in multiples of 90 shares thereafter)
All You Need To Know About Ashok Soota’s Happiest Minds IPO

The company allocated 1.90 crore shares to anchor investors at Rs 166 per share, aggregating to Rs 316 crore. Investors include Government of Singapore, Nomura Funds and Aditya Birla Sun Life Mutual Fund.

This is the third listing since SBI Cards and Payment Services Ltd.’s billion-dollar offering on March 2-5. Weeks later, India imposed the world’s strictest lockdown to contain spread of the Covid-19 pandemic. Prior to Happiest Minds, Rossari Biotech Ltd. and Mindspace Business Parks REIT Ltd. had launched their public floats.

The maiden offer values Happiest Minds at Rs 2,438 crore at the upper end of the price band, according to BloombergQuint’s calculations. Soota and CMDB II hold 48.83% and 19.43% in the company. After the share sale, total promoter shareholding will fall to 53.25% from 61.77%. Other shareholders stake will fall from 4.07% to 3.89%, while the rest will be held by public.

The company said it would use the net proceeds for long-term working capital and general corporate purposes. Nomura Financial Ltd. and ICICI Securities Ltd. are book-running lead managers to the issue.

Here’s a review of Happiest Minds before its IPO:

The Promoter

Soota, founding chairman and managing director of Mindtree Ltd. and former vice chairman at Wipro Ltd., is the executive chairman at Happiest Minds.

This is the second listing he is in charge of after Mindtree’s debut in 2007. “Growing dependence of digital business with agile technology will make the company’s business model very much scalable in the future,” Soota had said at a press meet while announcing the launch of the IPO. “A succession plan for the management has also been made.”


Incorporated in March 2011, Happiest Minds has three business units:

  • Digital business services—drives overall digital modernisation and implementation of solutions
  • Product engineering services—helps in building product and platforms
  • Infrastructure management & security services—helps in monitoring applications and infrastructure

The company has strategic alliances with Microsoft, Amazon Web Services, Pimcore, Salesforce and PTC, among others, for all its business units. The IT services provider had 148 active customers as on June 30.

For the financial year ended March 2020, 97% of the company’s revenue came from digital services—the highest among Indian software services providers—with almost 88% of its projects delivered through ‘agile’ delivery methodology, according to the red herring prospectus. More than 77% of the total revenue comes from the U.S., while the rest comes from India, the U.K. and other countries.


Happiest Minds’ revenue and cash flow from operations rose at a compounded annual rate of 14.7% and 124%, respectively, through financial years ended March 2018 to 2020.

The company’s operating margin expanded from 7% in the financial year ended March 2019 to 24.1% in the quarter ended June 2020. Its debt-to-equity ratio fell from 0.92 times to 0.80 times between March and June 2020.


Globant Ltd., EPAM Ltd., Endava Ltd., Accenture Ltd and Cognizant Ltd. are the global peers of Happiest Minds, while Infosys Ltd. and Mindtree are closest domestic competitors.

Happiest Minds has the highest annualised growth rate of profit before tax among peers.

Its operating margin, however, is the lowest among peers in the last financial year. Barring Accenture, Happiest Minds’ return ratios beat all the competition.

Key Risks

  • Revenue from operations is highly dependent on customers located in the U.S.
  • Employee attrition rates
  • Emerging technology talent crunch
  • Economic slowdown due to Covid-19
  • Restriction on immigration and work permits for costumers abroadForex fluctuations

Soota, however, said almost 76% of the company’s total revenue has not been affected by Covid-19, and the existing cash balance in the books is for future strategic acquisitions. Investments in the digital space and cloud computing are expected to increase owing to a shift towards remote business models and a rise in the number of online channels utilised by multiple industry verticals during the pandemic.

Aditya Kondawar, founder at JST Investments, said promoter Soota has a very strong and rich background, having spearheaded two IT companies that are big names today. The pricing, however, is a bit on the expensive side with fiscal 2020 price-to-earnings multiple at 23.7 times and 11.07 times for the next year. One interesting less talked about aspect was the pledging of the company, Kondawar said. The promoters have pledged 30% of the company’s total equity shareholding for a Rs 40-crore loan.

The company’s management, however, said it would remove the pledge along with the IPO.

(The risk factors have been compiled from the research note of Axis Capital.)

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