L&T Technology Services Limited (LTTS) is subsidiary of Engineering giant, L&T and was incorporated in Jun-2012. Post transfer of Product Engineering Services (PES) and Integrated Engineering Services (IES) division and 2 acquisitions in 2014-15, LTTS emerged as leading pure play Engineering Research & Development (ER&D) player.

Valuation: LTTS trades at 21.0x FY2016 EPS at upper-end of issue price band. On considering (1) strong growth potential of LTTS, which is ahead of some of the industry peers, coupled with (2) 38%+ RoE levels in FY2016, (3) FY2015-16 average cash flow from operations of `446cr, (4) strong ~64% dividend payout (translating to ~4% dividend yield), we are of view that LTTS stock has the potential to trade at premium to the peers. However, if we consider the average of the 3 peers, then LTTS stock has been priced at 19% discount. Given that the LTTS IPO has been priced at discount, Angel advises a SUBSCRIBE rating.