Bharti Hexacom announces IPO pricing between Rs 542 and Rs 570 for the opening on April 3rd

Bharti Hexacom, a subsidiary of telecom leader Bharti Airtel, sets IPO price range at Rs 542-570 per share. The IPO will run from April 3 to the 5th.

The anchor book for the first public issue of FY25 will open on April 2, aiming to raise Rs 4,275 crore. Bharti Hexacom’s IPO includes only an offer-for-sale (OFS), with Telecommunications Consultants India planning to sell 7.5 crore equity shares, representing a 15 percent stake.

Bharti Hexacom delivers mobile, fixed-line telephone, and broadband services branded as Airtel to customers in Rajasthan and the North East telecom circles in India.

Bharti Airtel, the promoter, holds a 70 percent stake, while Telecommunications Consultants India owns the remaining 30 percent (15 crore shares).

The company has allocated 75 percent of the issue size for qualified institutional buyers (QIBs), 15 percent for non-institutional investors (NIIs/HNIs), and the remaining 10 percent for retail investors.

The company will determine the allocation of IPO shares by April 8, with the 7.5 crore equity shares being credited to successful investors’ demat accounts by April.

Investors can start trading Bharti Hexacom IPO shares on April 12. At the top price, Bharti Hexacom’s market cap will be Rs 28,500 crore.

The communication solutions provider received approval from the market regulator, Securities and Exchange Board of India (Sebi), for the public issue on March 11. SBI Capital Markets, Axis Capital, BOB Capital Markets, ICICI Securities, and IIFL Securities are the book running lead managers, with KFin Technologies serving as the registrar.

Finances and risk factors

The company’s revenue has been steadily increasing, but its profits have fluctuated over the past three years. In FY21, low average revenue per user (ARPU) affected both revenue and profitability. This was addressed by a tariff hike in November 2021.

Furthermore, in FY22, the company’s restated profit was significantly influenced by exceptional items totaling ₹1,951 crore. These included gains from a commercial settlement with a service provider, settlement with a strategic vendor, and charges related to levies.

In the nine months ending December of FY24, revenue from operations reached ₹5,220 crore, marking a 7.8% increase from the ₹4,846 crore reported in the same period of FY23. Profit also rose by 34% to ₹622 crore, compared to ₹463 crore in the corresponding period.

Besides facing intense competition and high churn rates in the industry, Bharti Hexacom is susceptible to regulatory pressures. Its business continuity relies on spectrum rebidding and acquisition, while revenue risks include regulatory pricing ceilings, pricing pressures, reduced ARPU, and more.

As of December 31, 2023, the company had outstanding borrowings of ₹3,771 crore. This not only limits its transaction capabilities but also exposes it to interest rate fluctuations.

“We require significant capital for our capital expenditure, and failure to raise additional capital could negatively impact our business, financial condition, and results,” stated the company in its RHP.

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