Bharti Hexacom IPO subscribed 87% on Day 2

The initial public offering (IPO) of Bharti Hexacom saw a decent response from the investors during the second day of the bidding process. After being subscribed 34 per cent on day one, the issue saw buying interest from HNI and retail investors, whose quotas were fully booked.

The New Delhi-based Bharti Hexacom is selling its shares in the price band of Rs 542-570 apiece. Investors can apply for a minimum of 26 shares and its multiples thereafter. It is looking to raise Rs 4,275 crore via IPO, which is entirely an offer-for-sale (OFS) of 7,50,00,000 equity shares.

According to the data, the investors made bids for 3,59,08,444 equity shares, or 87 per cent , compared to the 4,12,50,000 equity shares offered for the subscription by 3.35 pm on Thursday, April 04. The three-day bidding for the issue will conclude on Friday, April 05.

The allocation for retail investors was subscribed 1.01 times, while the portion reserved for non-institutional investors saw a subscription of 1.13 times. However, the quota set aside for qualified institutional bidders (QIBs) attracted bids for only 70 per cent of their reservation at the same time.

Bharti Hexacom, incorporated in 1995, provides fixed-line telephone and broadband services to customers in Rajasthan and North East telecom circles in India. The company provides services in states such as Rajasthan and Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and Tripura.

The grey market premium of Bharti Hexacom has remained range-bound after the first day of the bidding. Last heard, the company was commanding a premium of Rs 55-60 in the unofficial market, suggesting a listing pop of about 10-11 per cent for the investors. However, the premium in the grey market stood around Rs 35-40, when the issue was announced.

Brokerage firms, tracking the issue, are mostly positive on it. They have suggested subscribing to the issue on the back of strong parentage, rising demand for its service, sound financials and high entry barriers. However, some analysts are skeptical of the full OFS nature and pricey valuations of the issue.

Bharti Hexacom plans to expand its network coverage and grow its revenue by following a simple strategy to premiumise its portfolio with continuous upgrades from 2G to 4G/5G customers, upgrading customers within its 4G plans for higher data packs, prepaid to postpaid upgrade, contextual data monetization, and through converged offerings, said Master Capital Services.

“The company is also focusing on delivering a brilliant customer experience through an Omnichannel Approach and extensive use of Data Science and at the same time improving its cost efficiencies by undertaking prudent cost optimization measures to improve profitability. Investors looking to invest, can invest in this IPO with a medium to long term perspective,” it said.

Ahead of its IPO, Bharti Hexacom has raised Rs 1,924 crore from anchor investors as the company allocated 3,37,50,000 shares at a price of Rs 565 apiece. Bharti Hexacom has reserved 75 per cent of the net offer for the qualified institutional investors (QIBs), while non-institutional investors (NIIs) will get 15 per cent of shares. Retail investors will get 10 per cent of the net offer.

Bharti Hexacom has demonstrated a strategic focus on acquiring and retaining premium customers, resulting in consistent revenue growth and increased market share. They have successfully increased revenue market share in recent fiscal years by providing digital solutions such as Airtel Black and family plans, said Arihant Capital Markets in IPO note.

“As the telecommunications industry rapidly evolves, companies must innovate and adapt their offerings to meet changing customer demands and market dynamics. The issue is valued at an EV/Ebitda of 11.85 times based on FY23 Ebitda of Rs 2,925.9 crore and P/E of 51.91 times based on FY23 EPS of Rs 10.97. We are recommending ‘subscribe’ for this issue,” it added.

Bharti Hexacom reported a net profit of Rs 281.80 crore with a revenue of Rs 5,420.80 crore for the nine months ended on December 31, 2023. The company reported a net profit at Rs 549.20 crore with a revenue of Rs 6,719.20 crore for the financial year ended on March 31, 2023.

Axis Capital, SBI Capital Markets, BoB Capital Markets, ICICI Securities and IIFL Securities are the book running lead managers of the Bharti Hexacom IPO, while Kfin Technologies is the registrar for the issue. Shares of the company are likely to be listed at both BSE and NSE on April 10, Wednesday. BusinessToday