Happiest Minds IPO: Information Analysis

At the age of 78 years, when most businessmen retire to golf clubs, Ashok Soota is far from hanging up his boots. Soota was a former vice-chairman at Wipro and later founded Mindtree. Happiest Minds is the third stint this serial entrepreneur is pursuing. The IPO is coming to the market just when sentiments have improved post fears of a covid-led meltdown. Buoyed by easing of monetary policy by central banks, expectations of a quick economic recovery and anticipation of an early availability of a vaccine, markets around the world rebounded. The S&P BSE Sensex is 30 per cent higher from its March lows. Many IPOs are lined up, with Happiest Minds, the first to come to the party. The Happiest Minds IPO has been buzzing in market circles for some time now. Two factors make it stand out. First, the association with Ashok Soota, an accomplished tech entrepreneur, and second, the concentration of new technology services that the company is into, including cloud, software as a service and security services. The company helps its clients in digital transitioning of their operations. Digital services are those that enable organisations to leverage new-age technologies like big data/analytics, robotics, machine learning, artificial intelligence and others. Its offerings include digital infrastructure/cloud (31.1 per cent of FY20 revenue), software as a service (SaaS, 29.4 per cent), security (14.9 per cent), analytics/AI (11.6 per cent), internet of things (9.8 per cent), respectively. It is able to sell its services through multi-year engagements with clients like Microsoft, Amazon Web Services, Intel and others. Furthermore, it is well-positioned in the high-growth and resilient to covid industries like Edutech and Hi-tech. Like most other Indian IT companies, Happiest Minds derives majority of its revenue from the US (77.5 per cent) and follows the offshoring model (77.5 per cent) wherein it taps into India's low-cost but rich tech talent pool. It competes with global companies like Globant, EPAM and Endava that derive all of their revenue from digital services. The global enterprise digital spend is expected to reach $2.1 trillion by 2025, growing at a pace of 20.2 per cent year-on-year (source: Company Prospectus). Going forward, it aims to solidify its digital presence, target larger clients and become a strategic vendor of choice for delivering complex software solutions to global companies across a range of verticals. Strengths: a) Strong Digital Services positioning: The company derives almost all (~97 per cent) of its revenue from Digital. With presence in high growth industries and newage service offerings like automation, analytics, internet of things and others, the company has a strong positioning in digital offerings compared to its larger peers. Also, it derives substantial part of its revenue from industries like Edutech and Hi tech (combined 42.3 per cent of FY20 revenue), which have been less impacted by Covid. b) Veteran Management: The company is headed by Ashok Soota, former founder and CEO of Mindtree and ex-Vice Chairman of Wipro. Along with him, the top brass of the company has