Bharti Hexacom IPO: All You Need To Know
Hexacom operates only in Rajasthan and the northeast circles.
Bharti Hexacom Ltd. will launch its three-day initial public offering on Wednesday to raise up to Rs 4,275 crore.
The maiden issue of Bharti Airtel Ltd.'s subsidiary is a pure offer for sale by the government-owned Telecommunications Consultants India Ltd. It will offload up to 7.5 crore shares and the price band is set at Rs 542–570 per share. The bidding for anchor investors opened for a day on Tuesday.
The proceeds of the stake sale will go to the Government of India. Airtel will hold on to its 70% stake in the company, even as TCI's shareholding will reduce to 10%. Currently, the government holds a 30% stake in the company.
SBI Capital Markets, Axis Capital, BOB Capital Markets, ICICI Securities and IIFL Securities are the book-running managers for the IPO.
Issue Details
Issue opens: April 3.
Issue closes: April 5.
Issue price: Rs 542–570 per share.
Offer for sale: Rs 4,275 crore.
Total issue size: Rs 4,275 crore.
Listing: BSE and NSE.
Business
Founded in 1995, Hexacom operates only in Rajasthan and the northeast circles. It also provides fixed-line and broadband services in Rajasthan. In the first nine months of fiscal 2024, revenue-wise market share for the Rajasthan circle is nearly 40% and 52% for the northeast circle.
The company has consistently increased its average revenue per user for mobile services from Rs 135 in fiscal 2021 to Rs 155 in fiscal 2022 to Rs 185 in fiscal 2023. It is Rs 197 In the first nine months of fiscal 2024.
The company's total customer base stands at 2.71 crore across both the circles as of Dec. 31.
Financial Highlights
Hexacom's full-year revenue for financial year 2023 stood at Rs 6,579 crore, up 22% on an annual basis. Operational profit was up 54% at Rs 2,925.9 crore. Margin was at 44% in comparison to 35% in the previous fiscal.
The company reported a revenue of Rs 5,220.8 crore in the first nine months of fiscal 2024 in comparison to Rs 4,846.5 crore in the year-ago period. It posted a net profit of Rs 281.8 crore in comparison to Rs 347.3 crore in the year-ago period. There was an exceptional loss of Rs 303 crore in the April–December period of 2023.
As of Dec. 31, cash flow from operations was at Rs 2,586 crore, net cash stood at Rs 27.7 crore and total borrowings was Rs 3,560.7 crore.
Risk Factors
Since the company operates in only two circles, its operations remain concentrated. Therefore, the scope of growth and customer additions remains limited.
Operations in the northeast also "require us to set up network infrastructure in difficult terrain and harsh weather conditions may affect our operations," according to the draft red herring prospectus.
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.".
