The first initial public offering from the House of Bharti is set to benefit only one shareholder, and it is not Bharti Airtel Ltd.
Bharti Hexacom Ltd. has filed a draft red herring prospectus with the Securities and Exchange Board of India to launch an IPO—a pure offer-for-sale of shares by the government-owned Telecommunication Consultant India Ltd.
Naturally, the proceeds of the stake sale will go to the government only. Bharti Airtel will hold on to its 70% stake in the company, even as TCI's shareholding will reduce to 10%. The government currently holds 30% stake in the company.
Airtel Hexacom, founded in 1995, operates only in Rajasthan and North East circles. It also provides fixed line and broadband services in Rajasthan.
Financial Highlights
Bharti Hexacom reported a revenue of Rs 3,420.2 crore for the six months ended September 2023. This compares with a revenue of Rs 3,167 crore for the corresponding period of FY22.
The company's full-year revenue for FY23 stood at Rs 6,579 crore, up 22% on an annual basis.
It reported a net profit of Rs 69.1 crore at the end of September 2023, as compared with Rs 195.2 crore in the six months ended September 2022. It reported an exceptional loss of Rs 303 crore from April to September 2023.
Operational profit stood at Rs 2,925.9 crore for FY23, up 54% from the previous fiscal. Margin was at 44% for FY23, as against 35% on an annual basis.
Cash flow from operations was at Rs 1,988.7 crore as on Sept. 30, 2023. Net cash till the same day stood at Rs 46.3 crore. Total borrowings stood at Rs 6,235.5 crore, as on Sept. 30, 2023.
Risk Factors
Since the company operates in only two circles—Rajasthan and North East, its operations remain concentrated. Thus, the scope of growth and customer additions remains limited.
"Operations in the North East also require us to set up network infrastructure in difficult terrain and harsh weather conditions may affect our operations," according to the DRHP.
The company may also need to incur additional capital expenditure to set up and replace infrastructure in remote regions, in addition to higher logistics costs, it said.
The outstanding legal proceedings against the company can involve an aggregate amount of Rs 2,233.8 crore, according to the DRHP.
"Such proceedings could divert the management’s time and attention and consume financial resources in their defence or prosecution," it said.
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