Bharti Hexacom shares may list at 10-15% premium to IPO price, predict market experts
KV Prasad Jun 13, 2022, 06:35 AM IST (Published)
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Summary
According to market observers, shares of Bharti Hexacom are commanding a premium of ₹92 in the unlisted market today (April 9). The premium in the grey market has been climbing since the closure of the bidding process.
Bharti Hexacom will make its market debut soon and analysts expect the stock to list at a 10-15% premium over the IPO price of ₹570 owing to the company’s large customer base, strong brand recognition, and an extensive distribution network to operate in high-growth markets. Additionally, the company benefits from its association with its parent company Bharti Airtel.
The issue was booked nearly 30 times at close on strong interest from qualified institutional buyers (QIBs). The quota for QIBs was subscribed 48.57 times, followed by non-institutional investors at 10.52 times. The category for retail investors was subscribed only 2.83 times.
“While considering the current optimistic uptrend in the markets, along with healthy subscription demand from all sets of investors, we expect Bharti Hexacom to list a healthy 10-12% higher to its issue price of ₹570,” said Prashanth Tapse, Research Analyst, Senior VP Research, Mehta Equities.
“The relationship between Bharti Hexacom and Airtel presents a compelling synergy, leveraging Airtel’s brand strength, diverse service offerings and sustainability focus to drive sustained market growth,” he said.
Hence, considering all the parameters, Tapse recommend allotted investors to ‘hold’ the Bharti Hexacom stock for long-term perspective only. “Those investors who wish to add on the listing days, can wait and watch the space post listing performance and accumulate on dips.”
He added that Bharti Hexacom’s anchor book showcases top global investors such as Capital Group, Fidelity, Blackrock, and ADIA participating ahead of the IPO opening — which makes other investors more comfortable about blocking money for long term.
Shivani Nyati, Head of Wealth at Swastika Investmart, expects Bharti Hexacom to see a moderate listing gain of around 15% over the issue price. “The company’s financial performance has been inconsistent, with a recent decline in profits. Additionally, geographic concentration, reliance on third-party infrastructure, and intense competition within the industry pose challenges to future growth.”
Further, Nyati said the IPO valuation of 51 times P/E (price-earninga) appears fully priced, leaving limited room for immediate gains after listing.
According to market observers, shares of Bharti Hexacom are commanding a premium of ₹92 in the unlisted market today (April 9). The premium in the grey market has been climbing since the closure of the bidding process.
Bharti Hexacom IPO details
Bharti Hexacom’s IPO, which was open for bidding from April 3-5, was priced in the range of ₹542-570 per share.
The issue was entirely an offer-for-sale (OFS), without any fresh equity issue. Telecommunications Consultants India (TCIL), the sole public shareholder in the company, offloaded 7.5 crore equity shares or a 15% stake via the OFS.
Since the issue is an OFS, Bharti Hexacom will not receive any proceeds. All the proceeds will be allotted to the selling shareholder in the company.
The Sunil Mittal-driven telecom major Bharti Airtel holds a 70% stake or 35 crore shares, while the remaining 30% shareholding, equivalent to 15 crore equity shares, was held by non-promoter TCIL.
Company overview
Bharti Hexacom is a wholly-owned subsidiary of Bharti Airtel and was incorporated on April 20, 1995. The company runs mobile services in Rajasthan and the Northeast telecommunication circles of India, which comprise Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura. It has a market share of 40% in Rajasthan and 50% in the Northeast.
Bharti Hexacom, as per its annual report, is targeting to cover all the urban areas and a few pockets of rural areas with 5G services by March this year. Airtel’s 5G Plus offers up to 30 times faster download speeds than 4G, it claimed in its annual report, adding that the 5G handset ecosystem is gradually evolving with more choices for customers at affordable price points.
For FY23, the Airtel unit recorded a net profit of ₹549 crore. Its revenue from operations remained strong, rising 22% to ₹6,719 crore.
For the six months ended September, the company posted a revenue of ₹3,420 crore, compared to ₹3,167 crore in the same period a year ago. However, its net profit declined to ₹69 crore from ₹195 crore in the year-ago period. The profit was impacted by higher tax costs and exceptional loss.
SBI Capital Markets, Axis Capital, BOB Capital Markets, ICICI Securities, and IIFL Securities were the book-running lead managers to the issue, while KFin Technologies was the registrar.
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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow