Bharti Hexacom shares rally 54% on listing day; should you book profits?

Shares of Bharti Hexacom made a solid Dalal Street debut on Friday and saw a strong buying interest from the investors post listing. The stock was listed at a premium of more than 32 per cent over its issue price of Rs 570 apiece on both BSE and NSE, delivering a profit of more than Rs 4,800 on each lot of 26 equity shares.

The listing of Bharti Hexacom has been better-than-expectations, amid sour market sentiments. Ahead of its listing, the company was commanding a grey market premium of Rs 120-125 apiece, signaling a listing pop of 22-23 per cent the investors. However, the premium in the unofficial market was steadily moving higher since the closure of the issue.

Post listing, the stock saw a decent buying interest from the investors as the stock rose another 16.5 per cent to Rs 879.90, taking the overall listing gains to 54.35 per cent over the issue price. However, the stock gave up its gains partially to hold above 800-mark and command a market capitalization of more than Rs 40,00 crore.

The strong buying interest left investors baffled if they should enter book profits in the counter or hold it for long term. Others were looking for opinions to enter the counter. Investors should hold the stock for a long term and one should buy the stock only on dips with a long-term perspective, suggested the market experts.

Bharti Hexacom defied pre-listing predictions of a modest debut and delivered a strong performance on the stock exchanges and delivered 33 per cent listing pop, said Shivani Nyati, Head of Wealth at Swastika Investmart. "This impressive listing surpasses pre-listing expectations, which were tempered by concerns about the company's financial performance and valuation," she said.

"While the listing exceeded expectations, the pre-identified risks remain relevant. Existing investors may consider holding their shares, while new investors should closely monitor the company's performance and market conditions before making a fresh entry," she said.

New Delhi-based Bharti Hexacom conducted its IPO within a price range of Rs 542-570 per share, with a lot size of 26 equity shares. The company successfully raised Rs 4,275 crore through its primary stake sale, which consisted entirely of an offer-for-sale of up to 7,50,00,000 equity shares by Telecommunications Consultants India.

The telecommunications-services provider witnessed a strong response to its IPO, fetching an overall subscription of 29.88 times. Qualified institutional bidders oversubscribed their quota by 48.57 times, while non-institutional bidders saw a subscription of 10.52 times. However, the portion reserved for retail investors was subscribed only 2.83 times by the end of bidding.

Bharti Hexacom listed above street estimates. Healthy listing is justified after receiving solid response on the last day of its issue biding said Prashanth Tapse, Senior VP (Research) at Mehta Equities. "Long term investors got a great opportunity to hold mid-cap telecommunications solutions providers and to play long term India’s telecom structural ARPU growth story.," he said.

"On valuation, it is matching the listed peers and even trading on premium to its parent. Hence, considering all the parameters we recommend allotted investors to 'hold' the Bharti Hexacom for long term perspective while those investors who wish to add on the listing days can wait and watch the space post listing performance and accumulate on dips," he added.

Bharti Hexacom offers fixed-line telephone and broadband services to clientele across Rajasthan and the North East telecom circles in India. Its service footprint extends to states including Rajasthan, Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura.

Axis Capital, BoB Capital Markets, SBI Capital Markets, ICICI Securities, and IIFL Securities were the book running lead managers for the Bharti Hexacom IPO, while Kfin Technologies serving as the registrar for the issue.

Even before its listing, JM Financial initiated coverage on the stock with a target price of Rs 790 apiece, which has already been met. "Bharti Hexacom's FY24-26 EBITDA CAGR could be higher at 17 per cent due to presence in high growth potential markets and relatively lower penetration of high ARPU postpaid and data subs," it said.

India wireless ARPU is on a structural uptrend given the consolidated industry, and as industry needs ARPU to rise to Rs 275-300 in 3-4 years to meet future capex needs, JM said. "We expect BHL’s ARPU to grow at 10 per cent CAGR, consisting of 6-7 per cent ARPU CAGR due to regular tariff hikes; and 3-4 per cent ARPU CAGR due to Bharti Airtel’s premiumization strategy."