Bharti Hexacom will make its market debut soon and analysts expect the stock to trade at a premium of 10-15% over the IPO price ₹570 due to the company's large customer base, strong brand recognition and extensive distribution network to operate in high-growth markets. Additionally, the company benefits from its association with its parent company Bharti Airtel.
Due to strong interest from qualified institutional buyers (QIBs), the issue was booked almost 30 times at market close. The quota for QIBs was subscribed 48.57 times, followed by non-institutional investors at 10.52 times. The retail category was subscribed only 2.83 times.
“Considering the current bullish bullish trend in the markets and strong subscription demand from all investor groups, we expect Bharti Hexacom to significantly outperform its issue price by 10-12% ₹570,” said Prashanth Tapse, Research Analyst, Senior VP Research, Mehta Equities.
“The relationship between Bharti Hexacom and Airtel represents a compelling synergy, leveraging Airtel's brand strength, diverse service offering and sustainability focus to drive sustainable market growth,” he said.
Therefore, considering all the parameters, Tapse recommends the assigned investors to “hold” Bharti Hexacom stock only for long-term reasons. “Investors looking to add on listing days can wait and watch how the market performs post-listing and accumulate on declines.”
He added that Bharti Hexacom's anchor book features the participation of top global investors such as Capital Group, Fidelity, Blackrock and ADIA before the IPO opens – making it easier for other investors to lock up money for the long term.
Shivani Nyati, Head of Wealth at Swastika Investmart, expects Bharti Hexacom to achieve moderate stock market growth of around 15% compared to the issue price. “The company's financial performance has been inconsistent and profits have declined recently. Additionally, geographic concentration, reliance on third-party infrastructure and intense competition within the industry pose challenges to future growth.”
Additionally, Nyati said the IPO's valuation of 51x P/E (price-to-earnings ratio) appears to be fully priced in, leaving limited scope for immediate gains post-listing.
According to market observers, Bharti Hexacom shares are fetching a premium of ₹92 today (April 9) on the unlisted market. Since the bidding process was completed, the premium on the gray market has increased.
Bharti Hexacom IPO details
Bharti Hexacom's IPO, which was advertised from April 3 to 5, was priced at approx ₹542-570 per share.
The issue was purely an offer for sale (OFS) without any new equity issue. Telecommunications Consultants India (TCIL), the sole public shareholder of the company, sold 7.5 crore equity shares or a 15% stake through the OFS.
Since the issue is an OFS, Bharti Hexacom will not receive any proceeds. The entire proceeds are allocated to the selling partner of the company.
Sunil Mittal-led telecom major Bharti Airtel holds a 70% stake or 35 crore shares while the remaining 30% stake, equivalent to 15 crore shares, was held by non-promoter TCIL.
Company overview
Bharti Hexacom is a wholly owned subsidiary of Bharti Airtel and was incorporated on April 20, 1995. The company operates mobile services in Rajasthan and the north-eastern telecom regions of India, which include Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and Tripura. The market share is 40% in Rajasthan and 50% in the Northeast.
According to its annual report, Bharti Hexacom aims to cover all urban areas and some rural areas with 5G services by March this year. Airtel's 5G Plus offers download speeds up to 30 times faster than 4G, the company claimed in its annual report, adding that the 5G mobile phone ecosystem is gradually evolving and offering customers more choices at affordable prices.
For FY23, the Airtel unit reported a net profit of ₹549 crore. Operating revenue remained strong, rising 22% to ₹6,719 crore.
For the six months ended September, the company posted revenue of ₹3,420 crore, compared to ₹3,167 crore in the same period last year. However, net profit fell to ₹69 crore from ₹195 crore in the same period last year. Profit was hit by higher tax costs and an exceptional loss.
SBI Capital Markets, Axis Capital, BOB Capital Markets, ICICI Securities and IIFL Securities were the underwriters of the issue while KFin Technologies was the registrar.
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