Bharti Infratel disappointed investors on Friday on its trading debut, with the stock ending 13 per cent below the issue price in its initial public offering (IPO). Analysts said uncertain outlook for the country's telecom tower business and premium pricing in the IPO, which helped the company raise Rs 4,170 crore, were the main reasons for the weak opening.
Bharti shares closed at Rs 191.20 on the Bombay Stock Exchange (BSE) and Rs 191 on the National Stock Exchange (NSE). It had offered 160.59 million shares in a price band of Rs 220-Rs 240 and the IPO was priced at the lower end of the band. Retail investors had bid for only 19 per cent of the shares set aside for them despite the offer for getting the units at 10 per cent discount to the issue price. Retail investors got the shares at Rs 210 a piece in the IPO, the biggest after state-run Coal India's Rs 15,480-crore ($3.5 billion) issue in 2010.
Bharti Infratel, partly owned by private equity giant KKR, fell as much as 14.3 per cent on NSE during intra-day trade. The share touched a low of Rs 188 and a high of Rs 200.
Many brokers had advised against subscribing to the IPO as they did not expect any listing gains. Post-listing, Akhil Gupta, managing director and vice chairman, Bharti Infratel told news channels he believed the pricing of the IPO was right.
"It is too early to comment on listing price," he said. On the business prospects, Gupta said, "One needs to look at the long-term opportunity of the tower business." There is no over-capacity in the tower business at the moment.
"I would always be a little surprised that the retail investor would be in a better position to discover a price than what you call the qualified institutional buyer. They are called qualified buyers because they know better how to discover a price," Gupta said in response to a question about the scant retail participation in the issue.
Bankers said the disappointing debut of Bharti is unlikely to impact the appetite for the forthcoming IPOs as long as these are priced well. Shares of P C Jeweller and Care Ratings, which were listed earlier, are trading above their offer prices.
"It's very clear that investors are no longer impressed with big names. They want to know what is the company leaving behind for them post-listing," said the managing director of a leading retail broker.
A top official of an investment bank, which underwrote the the Bharti issue, said he expected some institutional investors, which subscribed to the issue, to buy the shares at between Rs 170 and Rs 180 a piece. Bank of America Merrill Lynch, Barclays Plc, Deutsche Bank AG, HSBC Holdings Plc, JPMorgan Chase & Co, Standard Chartered Plc and UBS AG were foreign banks that underwrote the Bharti Infratel IPO. Kotak Mahindra Bank and Enam Securities were domestic investment to the issue.
Bharti Infratel has about 34,000 towers and owns 42 per cent of Indus Towers, the world's largest tower company. Bharti Infratel has a 38 per cent share of India's telecommunications tower market.