Bharti Infratel IPO opens on Dec 10

Last Updated: Sat, Dec 01, 2012 06:23 hrs

Bharti Infratel, the telecommunication tower arm of cellular operator Bharti Airtel, is set to raise Rs 4,000-4,500 crore through the country's biggest initial public offering (IPO) in two years.

It has set a price band of Rs 210-240 a share for the entry, scheduled to open on December 10 for foundation investors and close on December 14 for retail subscribers. The issue will constitute 188.9 million shares, including 146.2 mn new shares or 10 per cent of Bharti Infratel.

According to the company, it could raise up to Rs 4,530 crore at the upper band and Rs 3,970 crore at the lower band. This would be the largest IPO after Coal India which raised Rs 15,199 crore, and was subscribed 15.2 times in November 2010. The Coal India share price has increased 50.6 per cent since debut. In 2012, 18 companies have raised Rs 1,642 crore through IPOs, according to data compiled by the Business Standard Research Bureau.

"The issue comes at an absolutely perfect time, when everybody is expecting a surge in data traffic. Operators' spending indicates demand for towers is going to increase," Akhil Gupta, managing director, Bharti Infratel, told reporters here on Friday.

Through the IPO, Bharti Infratel's existing four shareholders, including Temasek, Goldman Sachs and Citigroup which invested about $1 billion in 2007, will sell 42.7 mn shares for partial exits. KKR & Co had also invested about $250 mn in February 2008. Bharti Airtel owns about 86 per cent of the stake but will not be selling any shares. After the issue, Bharti Airtel's stake would fall to 79.42 per cent and the private equity companies will have about 10.5 per cent holding, down from 13.91 per cent at present.

Bharti Infratel has a little more than 33,000 telecom towers and the company also holds a 42 per cent stake in the world's biggest tower company, Indus Tower. Indus has about 1,10,000 towers in India and has Vodafone and Idea Cellular as the other partners.

Telecom tower companies mainly get revenue from leasing of infrastructure to mobile phone carriers.

According to a top executive in a rival tower company, with the number of operators coming down due to the cancellation of 122 telecom licences in February this year, there has been a fall of about 30,000 tenants and tenancy growth has been flat. However, with refarming and fresh auction of spectrum, and more clarity in policy, he says telcos are expected to invest again from March, to expand and also roll out third generation services for better utilisation of the towers. There are about 5,76,000 telco tenants, in about 3,60,000 towers across the country.


Issue size in Rs crore

BSE price in Rs

Issue price 30-Nov-12 % chg
Coal India 15,199.44 245.00 365.95 49.37
Reliance Power 11,700.00 281.25 97.05 -65.49
DLF 9,187.50 525.00 210.10 -59.98
NHPC 6,038.55 36.00 23.25 -35.42
Cairn India 5,260.79 160.00 329.35 105.84
Adani Power 3,016.52 100.00 52.90 -47.10
Power Grid 2,984.45 52.00 118.00 126.92
Oil India 2,777.25 420.00 454.20 8.14
JSW Energy 2,700.00 100.00 61.75 -38.25
Jaypee Infratech 2,257.60 102.00 46.90 -54.02
Data compiled by BS Research Bureau

Though standalone tower companies are having a tough time, those owned by mobile operators are better placed because of assured anchor tenants, said Gupta.

On an average, the tenancy rate for the industry in India is 1.4 to 1.6, with some of the smaller tower companies having 2.2. According to a Bharti Infratel official, it enjoys a tenancy rate of around 1.9. A rate of 1.7 to 1.8 is considered the break-even point, said the expert.

Listed tower companies in the US, such as American Tower Corp and Crown Castle International Corp, are currently trading at a little over 17 times of EV/Ebitda ((enterprise value/earnings before interest, taxes, depreciation and amortisation). Bharti Infratel expects its shares could be traded at 9-10.5 times of EV/Ebitda, initially.

The company's profit increased by 36 per cent to Rs 750 crore in 2011-12. Till September 2012, total debt was around Rs 1,800 crore, said the company.

Bharti Infratel has stated in the offer document that the issue's proceeds would be used in setting up 4,813 new towers, at an estimated cost of Rs 1,087 crore, while upgradation and replacement of existing towers would require Rs 1,214 crore and green initiatives entail a cost of Rs 639 crore.

Bank of America Merrill Lynch, JPMorgan, Barclays Standard Chartered, Deutsche Bank, HSBC, UBS, Kotak Mahindra Capital Company and Enam Securities are advising the issue. The shares of Bharti Infratel will be listed on the Bombay Stock Exchange and National Stock Exchange.

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