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Data is the new oil. And we are truly guzzling it. We have come a long way since Kilobytes of data with dial up networks to Gigabytes of data on broadband connections. Data Analytics has become key and is used by Netflix, Facebook and Instagram to keep us hooked on their platforms.
Data Analytics business opportunities are like the IT opportunities of the late 1990s, and India has a massive engineering talent base with excellent mathematics skills, available at a very low cost. This provides India with the perfect ability to capture the opportunity.
That’s where Latent View comes in. Latent View is a pure-play data analytics company. Its expertise includes customer profiling, targeted marketing, supply chain management, finance and risk management, and HR functions.
The pure-play analytics market is highly fragmented. Mid-sized and large-sized multi-service providers are adding niche analytics capabilities through acquisitions of small pure-play analytics service providers. Some of the key players in India are Mu Sigma and Fractal Analytics which are both funded by private equity funds.
Global Data Analytics market is currently at USD 174 billion, and is expected to grow at 18% CAGR over 2020-24.
Latent View benefits from strong relationships with blue-chip clients like Adobe and Uber. They also have a very strong and experienced management team to rely on. However, the analytics industry is notorious for tough competition, with a lot of start-ups, and competition for talent. There’s also a lot of client concentration, with top 5 clients providing more than half the revenue.
So, what is our view on company valuation?
Latent View came out with an IPO in November 2021 and got a blockbuster response with more than 325 times oversubscription. Only a few lucky retail investors would have got allocation.
The Company share price zoomed to around 150% on the listing day, with the stock appreciating even further post listing day. In comparison to Infosys’ Price to Earnings ratio of 36 times, Latent View trades at a Price to Earnings ratio of 118 times.
So, the company is very richly valued and may face a situation similar to Infosys post dot com crash where it took 6 years for investors to recover their invested capital.
As for the risks to this analysis, the fear of missing out and the lack of options may drive the price higher in the short and medium term. Similarly, an acquisition by a bigger player at a higher valuation is also not off the table.
So, would you invest in Latent View Analytics?
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