Bharti Infratel, the towerco arm of Indian telco Bharti Airtel, launched its IPO today to mixed recommendations from analysts.
As TelecomFinance reported yesterday, the towerco has already allotted shares worth US$120m to anchor investors as part of the…
Bharti Infratel, the towerco arm of Indian telco Bharti Airtel, launched its IPO today to mixed recommendations from analysts.
As TelecomFinance reported yesterday, the towerco has already allotted shares worth US$120m to anchor investors as part of the public offering, which is expected to raise up to US$832m for 10% of the company’s equity.
Aside from the anchor investor allocation, the price band for shares in the IPO is between Rs210 (US$3.85) and Rs240 (US$4.4).
While uptake from today’s issue, which closes on 14 December, is yet to be confirmed, some analysts thought the shares were overpriced.
“We don’t yet have an idea on the uptake of the IPO from today, but we are advising our clients to avoid the listing as the valuation is too high,” Ankur Rudra, analyst at Indian brokerage Ambit Capital, told TelecomFinance. “The shares are priced at 10x or 12x EBITDA but we think they should be valued at 7x to 9x EBITDA.”
A telecoms analyst at another Indian brokerage agreed that the shares were overvalued.
“The valuation is not cheap,” he said. “They’re 12x EBITDA and I think they should be within 10x EBITDA.”
The analyst went on to say that he expected demand for the public offering to come from the international market.
“Domestic investors such as mutual funds and insurers are not excited about the IPO,” he said. “However I think foreign investors are highly interested, as valuations of towercos across the world tend to be from 16x to 20x EBITDA. So in contrast to other towercos this IPO is quite reasonably priced.”
He added that Bharti Infratel’s growth would not come in the short term. “Growth opportunities are limited until data services pick up in India, which I expect will be six to eight quarters away,” he said.
However, in contrast to the two analysts’ views, another analyst in India told TelecomFinance he thought the pricing was reasonable bearing in mind the towerco’s cash generation. “I think the valuation has been priced fairly,” he said.
Bank of America Merrill Lynch, JP Morgan, Standard Chartered, UBS, Barclays, Deutsche Equities, Enam Securities, HSBC and Kotak Mahindra Capital are lead managers on the transaction.
