Bharti Hexacom IPO booked over 23 times on Day 3 so far; QIB portion subscribed 38 times

The initial public offering (IPO) of Bharti Hexacom saw a strong response from the investors during the third and final day of the. Bidding for the issue was mostly led by institutional bidders. The issue was overall subscribed more than 1.12 times on the second day of the bidding.

The New Delhi-based Bharti Hexacom is selling its shares in the price band of Rs 542-570 apiece. Investors can apply for a minimum of 26 shares and its multiples thereafter. It is looking to raise Rs 4,275 crore via IPO, which is entirely an offer-for-sale (OFS) of 7,50,00,000 equity shares.

According to the data, the investors made bids for 96,22,70,686 equity shares, or 23.33 times, compared to the 4,12,50,000 equity shares offered for the subscription by 3.15 pm on Friday, April 05. Bidding for the issue, which opened on Wednesday, April 03, concludes today.

The allocation for retail investors was subscribed 2.40 times, while the portion reserved for non-institutional investors saw a subscription of 8.83 times. However, the quota set aside for qualified institutional bidders (QIBs) attracted bids for more than 37.55 times of their reservation at the same time.

Bharti Hexacom, incorporated in 1995, provides fixed-line telephone and broadband services to customers in Rajasthan and North East telecom circles in India. The company provides services in states such as Rajasthan and Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and Tripura.

The grey market premium of Bharti Hexacom has surged before the bidding opened on day one. Last heard, the company was commanding a premium of Rs 55-60 in the unofficial market, suggesting a listing pop of about 10-11 per cent for the investors. However, the premium in the grey market stood around Rs 35-40 earlier, when the issue was announced.

Brokerage firms, tracking the issue, are mostly positive on it. They have suggested subscribing to the issue on the back of strong parentage, rising demand for its service, sound financials and high entry barriers. However, some analysts are skeptical of the full OFS nature and pricey valuations of the issue.

At the upper price band, Bharti Hexacom is available at a P/E of 51.9 times (FY23), which appears to be fully priced. Given its strong parentage, leadership position, large customer base in key operating circles, high growth potential, rising ARPU, and expanding customer base, we assign a 'subscribe' rating on a medium to long term basis, said Geojit Financial Services.

Ahead of its IPO, Bharti Hexacom has raised Rs 1,924 crore from anchor investors as the company allocated 3,37,50,000 shares at a price of Rs 565 apiece. Bharti Hexacom has reserved 75 per cent of the net offer for the qualified institutional investors (QIBs), while non-institutional investors (NIIs) will get 15 per cent of shares. Retail investors will get 10 per cent of the net offer.

Bharti Hexacom reported a net profit of Rs 281.80 crore with a revenue of Rs 5,420.80 crore for the nine months ended on December 31, 2023. The company reported a net profit at Rs 549.20 crore with a revenue of Rs 6,719.20 crore for the financial year ended on March 31, 2023.

IndSec Research has a 'subscribe for long term' rating on it on the back of promoted by strong parentage; dominant market share in areas of operations; opportunity arising from increasing telecom penetration; potential to raise ARPU due to under-indexation of Indian Players vs Global peers; and data monetization and better realizations for telcos with increasing 5G adoption.

Axis Capital, SBI Capital Markets, BoB Capital Markets, ICICI Securities and IIFL Securities are the book running lead managers of the Bharti Hexacom IPO, while Kfin Technologies is the registrar for the issue. Shares of the company are likely to be listed at both BSE and NSE on April 10, Wednesday.