Latent View Analytics IPO: Let's Analyze

Suppose you have a book full of mathematical formulas but you don't know how to relate the concepts to application-based questions. So even though you have all the information you need to solve a math problem, the book's utility to you is zero, right? There is always the need to find the right balance between everything. The formulas and its application, between joy and sufferings, between appetite and aversion and so is the same for the functional core of the business and some hardcore analytics. Analysis of the data available to the business is segregated and made readable for its application to the business processes. 

Latent View Analytics claims expertise in the entire value chain of data analytics. 

Here is everything you need to know before deciding to put money in their IPO, or shall we say let's do the 'data analytics' of this pure-play data analytics services company?

Industry Overview

Even though COVID's impact on all the countries was pretty significant and it took a lot out of the financial pool of even some big names in the industry, the recovery is expected to be faster than predicted initially. 

If you look at the future growth, the overall market for data analytics in FY20 was USD 174 Billion and it is expected to grow at a CAGR of 18% to USD 333 Billion by 2024 globally. Now 18% CAGR growth is a brilliant growth rate. Now, if you are not aware of what a CAGR is, you might miss out on the important technical analysis of the businesses. And with the cherry on top, Covid has accelerated the remote working environment, which is expected to increase the demand for digital services. 

Within IT, there are two categories of services- the first is the Legacy application and the second is the Latest Technology. Globally with almost 60% of the budget in 2019 spent on Legacy applications like outdated architecture & software components that didn't fit well with the newer systems, organizations across the world are limiting their budget on legacy application maintenance and redirecting it to digital initiatives like Analytics, Cloud-based enterprise applications, customer experience, AI etc.

In the future, as the usage of data is growing exponentially, Data and Analytics is expected to contribute significantly to major data-driven and impactful decisions of the organization.

Every company is on its own to race up its competitors. So what makes this company different from the others? Let's find out with the company overview.

Company Overview

The Promoters of the Late View are Mr. Venkat Vishwanathan, Rajan Sethuraman, and Pramad Jandhyala. All of them are alumnus of IIM Calcutta. Imagine how much brainpower is there in the air when all of them are in a room. 

Let's move forward with the technical aspects of the functionalities of the company. The Latent View Analytics basically provides 4 types of services-

1. Consultancy Services in which, while analyzing the data, the company lets its clients know what are the current trends, challenges and opportunities.

2. Data Engineering basically involves structuring the entire data, including the design and development in which the analyzed data is made more useful and customized according to the business needs and implemented in the business process.

3. Business analytics , the process in which the analysis and insights are delivered to the client for a more accurate and data-driven decision.

4. Lastly, they provide Digital solutions for automation, as the name suggests, business processes are automated to predict trends and generate data-driven insights. 

With all these services that an IT company could put to use, Latent View Analytics has worked with or for 30+ fortune 500 companies in the last 3 years and some big names in their patron list include Adobe, Uber Technology, and 7-Eleven.

How can we not mention the financial position and profitability of the company if we are considering an IPO?

Financials of Latent View Analytics

An important aspect to look at while analyzing the financial statements of any company is to look at the revenue followed by profits. The revenue has been stagnant in the range of 300 crores. The profits although have grown at a good rate, the main reason of which could be to increase in operating profits due to remote working during covid. The EBITDA margin has also consistently increased in the last 3 years and is well above 20%. So, the financials for the last 3 years are looking good.

Moving forward, the below table mentions all the details of this upcoming IPO .

IPO Details

Issue sizes are always so mind-boggling; wouldn't you want to know why the company needs this huge capital?

Objectives of the IPO

The company plans to use the funding for Mergers & Acquisitions . In addition, the funds will be put into capitalizing its subsidiaries to jump up the market share. Day-to-day operational capital requirements are also to be met with these raised funds and, also for Corporate Purposes, which pretty much every company would enlist as a reason. 

When in doubt, you SWOT. So, for starters, let's take a look at the Strengths & Weaknesses of the IPO.

Strengths

• The client base of Latent view includes blue-chip companies from varied industries. -  The services provided are business intelligence and visualization services that advance to strategic insights and predictive modeling in Technology, CPG and Retail, Industrials, and BFSI industries.

• Client-driven innovation and functional expertise - End-to-end and customized solutions are provided to the clients through a consultative approach wherein developers, analysts, and nontechnical users come together and make the decision-making process easier. 

•  Scalable and attractive financial profile - The company's financial structures are supported by stable and recurring revenues and considerable operating power. A healthy cash flow is maintained through these.

• Strong leadership, team guiding capability, and go-to-market strategy. - The promoters and senior management of the company are literally living legends with academic degrees as good as their experience in the data and analytics industry.

Weakness

• A limited number of clients account for a significant portion of the company’s revenue. If we talk in numbers, 50% of revenue is from the top 5 clients which exposes the company to the risk of losing a significant amount from the balance sheet if even any one of these companies drops out.

• Around 90% of the company’s revenues are derived from clients in the US. Any disruption in the US economy can impact the business of Latent View Analytics.

• Exchange rate fluctuations can impact the revenue of the company since a major portion of its revenue is in foreign currencies.

• Failure to maintain its competitive position in the markets with competitors like TCS, Infosys, HCL, Wipro, Accenture, Capgemini with bigger brand names.

• Dependence on its strong brand and corporate reputation.

• Its revenues are highly dependent on a limited number of industry verticals.

• Long and unpredictable sales cycle.

• Inability to modify its pricing models to retain existing clients and attract new clients.

Well, risk hai toh ishq hai but the decision is yours to make.

The Bottom Line

Now with everything stated and bifurcated, the obvious question is should you put your money in this IPO or not? Well, that’s on you to decide but we sure can tell you that Latent View Analytics is the leading data analytics company in India and with the growing need of the businesses for proper data-driven decision making, it is the fastest growing IT sector in India.

The company has excellent leadership with a great pedigree. The most important point that should be noted here is that the company has strong financials with high profitability and negligible debt. Although with pretty tough competitors in the industry, Latent View is a fundamentally strong company and is reasonably valued. 

If you believe the future would be nothing without technology, well, technology would be nothing without data analytics.

*Disclaimer: The stock discussed above aren't recommendations from Finology; they are only picked to make you understand the concept.