Indian investors don’t seem to have lost their affection for information technology (IT) stocks, new or old.
So when L&T Infotech—the IT arm of Larsen & Toubro, India’s largest infrastructure and engineering firm—decided to hit the equity markets with an initial public offering this month, investors lined up around the block.
The Rs1,243-crore IPO, which opened for subscription on July 11, received over a million applications by the time it closed on July 13. This was the highest number of subscriptions received for any share sale in the last five years. The issue was oversubscribed by 12 times.
The IT firm’s IPO plans have been in the works since 2014. In the run up to the listing, it first filed a draft red-herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI) in Sept. 2015, which the capital markets regulator approved three months later. But L&T Infotech withdrew the prospectus in April 2016 citing a “change in the offer structure and other considerations.” The same month, the company filed a new DRHP.
L&T Infotech was founded in 1996 and provides services like testing, enterprise solutions, and digital solutions. For the 2016 financial year, the Mumbai-headquartered firm reported a revenue of Rs6,143 crore and the company’s clients include 41 of the Fortune 500 companies. The firm is owned by L&T, which has a stellar reputation among investors and is often regarded as a proxy for corporate growth in India.
Meanwhile for investors, India’s IT industry continues to be a top pick. The $143-billion Indian IT and business process management industry is growing at 8.5% annually and employs over 3.5 million people. Investors believe that IT stocks could outperform the broader Sensex index, with a weak rupee boosting revenues—most of the IT companies have massive dollar earnings.
It’s also boom time in India’s IPO market. The 2015 calendar year had the highest number of IPOs in four years. The first quarter of the 2016-17 financial year has also been quite solid, with firms raising Rs5,728 crore ($850 million), the highest in the last nine years.