Bharti Infratel IPO opens  for subscription on Dec 11

Bharti Infratel Limited (BIL), the tower arm of the country’s leading telecom service provider Bharti Airtel, is planning to hit the market on December 11 with an Initial Public Offer to raise around Rs 4,500 crore. This is the second issue from the Bharti Group after a gap of over a decade.

Bharti Infratel IPO opens  for subscription on Dec 11

The proposed IPO will be one of the biggest after state-run Coal India raised Rs 15,475 crore in October, 2010. The company is engaged in telecom tower infrastructure business. It deploys, owns and manages towers and communication structures for all wireless operators.  The business of Bharti Infratel and Indus is to acquire, build, own and operate tower and related infrastructure. Bharti Infratel and Indus currently provide access to their towers primarily to wireless telecommunications service providers. Bharti Infratel’s and Indus’s three largest customers are Bharti Airtel (together with Bharti Hexacom), Vodafone India and Idea Cellular. They are the three leading wireless telecommunications service providers in India by wireless revenue. In India, Infratel has over 34,000+ towers, across 18 states, and 11 telecom circles, and still growing. Bharti Infratel also has a 42% stake in Indus Towers which was created as a joint venture between Bharti Infratel, Vodafone and Aditya Birla Telecom to hive off the towers business in 15 telecom circles.

BIL mulls installation of 4813 towers, upgrading and replacing existing towers, green initiatives at tower sites along with generation corpus funds. To part finance this, it is planning a book building route for 188,900,000 equity shares of Rs. 10 each within a price band of Rs. 210-240. With this float, the company is looking at a corpus of Rs. 3966.90 crore to Rs. 4533.60 crore based on lower or higher price band. It is offering a discount of Rs. 10 per share to retail investors and many banks and NBFCs have come forward to finance the IPO. The issue opens for subscription on Dec 11 and closes on Dec 13 for QIBs and on Dec 14 for all other categories. Post allotment, the shares would be listed on the BSE and NSE. Minimum application is to be made for 50 shares and in multiples thereof thereafter.

CRISIL has rated this IPO as IPO Grade 4 indicating “above average fundamentals” of the company. Karvy Computershare is the registrar of the issue and there is a band of 13 BRLMs for this IPO. Surprisingly, during road shows, none of them shared the dais with the promoters.

The BRLM’s mandate performances are given below. The first figure indicates the total mandate and the figure in the bracket denotes failure to give listing gains. They are Bofa Merrill – 12 (4),  JP Morgan – 10 (2), Stan Chart Secur – NA, UBS Securities – 10 (3), Barclays Securities -NA, Deutsche Equities – 7 (2), Enam Securities – 44 (15), HSBC Securities – 4 (1), Kotak Mahindra Cap – 46 (13), BNP Paribas – NA, DBS Bank – NA, HDFC Bank – 1 (0) and ICICI Securities (25 (11).

On BIL’s performance front, for the last three fiscals, it has posted an average EPS of Rs. 3.46. For the first half of the current fiscal, it posted an annualized EPS of Rs. 5.28 and its NAV stands at Rs. 82.10 (on consolidated basis).  These earnings gives EPS of Rs. 4.89 on fully diluted equity. Thus the asking price is at a P/E of 43 to 49 on lower-upper price band and looks very aggressive. According to the company, they have no listed peers. It has issued bonus shares in the ratio of 9999 for 1 in August 2008 and 2 for 1 in August 2012. Shares issued to private equity players at Rs. 788.56 in March 2010 got adjusted to Rs. 262.85 post bonus and thus they are exiting at a discount to their acquisition cost and are raising doubt on likely future of BIL. Considering the high asking price, it is better to buy at discount post listing.

Dilip Davda


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