Bharti Hexacom Ltd is a communications solutions provider offering consumer mobile services, fixed-line telephone and broadband services to customers in 2 telecom circles. Bharti Hexacom IPO intends to raise Rs 4,275.00 crores. The issue is entirely an offer for sale of 7.5 crore shares by TCIL.
| IPO opens | April 3, 2024 |
| IPO Closes | April 5, 2024 |
| IPO Size (Rs.) | ₹4,275.00 Cr |
| IPO Size (shares) | 75,000,000 shares |
| Breakup | only OFS |
| Face Value: | ₹ 5 |
| IPO Price in Rs : | ₹542 to ₹570 per share |
| Minimum Lot | 26 Shares |
| Listing At | NSE, BSE |
| QIB | ~75% |
| NII Quota | ~15% |
| Retail Quota | ~10% |
| Lead Manager | Axis Capital, SBI Capital Markets, BOB Capital Markets, ICICI Securities, IIFL Securities |
| Registrar | Kfin |
About Bharti Hexacom Limited:
- Company was originally incorporated in 1995 as ‘Hexacom India Ltd’.
- In 2004, Airtel acquired a majority 70% of the equity share capital, while the Government of India through Telecommunications Consultants India Ltd (“TCIL”) owned 30% and company was renamed as Bharti Hexacom Limited.
- They are a communications solutions provider offering consumer mobile services, fixed-line telephone, and broadband services to customers in the Rajasthan and the North East telecommunication circles in India, which comprises the states of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura.
- It serves 2.7 crore customers in the two circles i.e. Rajasthan and North-East (total 6 states) , under the brand ‘Airtel.
- As of December 31, 2023, Company was present in 486 census towns a.
- BHL offers its services under the brand ‘Airtel’. They have a distinct strategy to premiumise their portfolio by acquiring and retaining quality customers and delivering an experience through their omnichannel approach and data science.
Financials: Bharti Hexacom Limited
| Particulars/ Rs (in crore) | 2023(9) | 2022(9) | 2023(12) | 2022(12) | 2021(12) |
| Revenue from operations | 5,220.80 | 4,846.50 | 6,579.00 | 5,405.20 | 4,602.30 |
| EBITDA | 2,576.40 | 2,091.00 | 2,888.40 | 1,898.50 | 1,137.30 |
| EBITDA Margin (%) | 49.40% | 43.10% | 43.90% | 35.10% | 24.70% |
| PAT | 281.8 | 347.3 | 549.2 | 1,674.60 | -1,033.90 |
| Share Capital | 250 | 250 | 250 | 250 | 250 |
| Net Worth | 3,978.80 | 3,920.20 | 3,972.20 | 3,573.20 | 1,898.70 |
| EPS (Basic & Diluted) | 5.6 | 7 | 11 | 33.5 | -20.7 |
| ARPU for Mobile Services (₹) | 197 | 184 | 185 | 155 | 135 |
| Total Borrowings | 6,253.00 | 6,349.80 | 6,269.30 | 7,198.30 | 5,975.20 |
| Debt Equity Ratio (x) | 1.4 | 1.6 | 1.5 | 1.9 | 3 |
| Net Debt to EBITDA (x) | 2.9 | 3.8 | 2.8 | 4.7 | 6.8 |
| Net Asset Value per share (₹) | 88.3 | 80.2 | 84.2 | 73.2 | 39.7 |
| Return on Net worth (%) | 7.10% | 8.90% | 13.80% | 46.90% | -54.50% |
| Return on Capital Employed (%) | 10.70% | 7.60% | 10.70% | 4.10% | -1.60% |
| Post issue Share Capital | 250.00 | ||||
| FV | 5.0 | ||||
| IPO price | 570.0 | ||||
| EPS Fy23 | 11.0 | ||||
| PE Fy23 | 51.9 | ||||
| EPS Fy24 (annualized) | 9.3 | ||||
| PE Fy24 (annualized) | 61.5 | ||||
| Market cap in Lacs | 28,500.0 | ||||
| Market cap / Sales | 4.33 |
Bharti Hexacom IPO: Anchors
Bharti Hexacom raised Rs 1,923.75 crore from anchor investors on April 2. These included bids 97 institutional investors including names such as Blackrock Global Funds, Pictet, Smallcap World Fund, Capital Group, American Funds, Fidelity Funds, and Abu Dhabi Investment Authority. Other notable participants included Stichting Depository APG, Aberdeen, Schroder International, Treasurer of the State of North Carolina Equity Investment Fund, BNP Paribas Trust Services Singapore, Eastspring Investments, Morgan Stanley, and HSBC etc.
Domestic Mutual fund houses, include the likes of SBI Mutual Fund, ICICI Prudential Mutual Fund, HDFC Mutual Fund, Aditya Birla Sun Life Trustee, Axis Mutual Fund, Kotak Mutual Fund, Nippon Life India, Mirae Asset, UTI Mutual Fund, Franklin, Tata Mutual Fund, DSP Mutual Fund, Whiteoak Capital, Sundaram Mutual Fund, Bandhan Mutual Fund, and PGIM India, who participated in the anchor book.
Bharti Hexacom IPO: Salient Points
- 75% reserved for QIBs dur to loss in FY21 and FY22.
- Bharti Hexacom is a 70% subsidiary of Bharti Airtel, enjoying 40% and 53% revenue market share in the circles of Rajasthan and Nort East respectively. The spectrum it holds is valid till different dates (year 2030 to 2042)
- Bharti Hexacom is at number one position in the North East circle and is at second position in the Rajasthan circle.
- Their customer market share has grown consistently in Rajasthan from 33.1% as of March 31, 2021 to 35.0% as of December 31, 2023 and in the North East from 43.6% to 49.8% between the same dates.
- Peers
| Company | CMP (₹) | Revenue(₹cr) | Net Profit(₹ cr) | NPM % | PE | Macp/sales |
| Bharti Hexacom | 570.0 | 6,579.00 | 549.2 | 8.3% | 51 | 4.3 |
| Bharti Airtel | 1,218 | 1,39,145 | 12,287 | 8.8% | 63.2 | 4.86 |
- ARPUs have risen 15% CAGR in past 3 years, However competitive pressures from Jio are unlikely to be over.
- A possible entry by Elon Musk’s Starlink can act as a big disruptor in future.
- Average revenue per user (ARPU) of Rs. 197 per month for Bharti Hexacom is lower than Airtel’s Rs. 208.
- Its net-debt to EBITDA is 2.9 ( Aitel 2.4).
- For the nine months ended December 2023, sales were up by 7.7% to, OPM increased 598 bps to 48%, leading to a 23.2% increase in operating profit.
- There may be good growth potential in the telecommunications sector of Rajasthan and Northeast, the regions Bharti Hexacom operates.
- It holds a spectrum portfolio with varied pool of mid band spectrum (1800/2100/2300 MHz bands). As per CRISIL This has enabled it to offer 5G Plus services on the widely chosen non-standalone network architecture and at a low cost of ownership and thus save a good amount on towards5G roll out.
- Company derives significant synergies from their relationship with Promoter, Airtel.
- Bharti Hexacom IPO is coming at a PE ratio of 52x(fy23 earnings) and 61.5x ( fy24 annualized earnings).
- I am likely to apply for Bharti Hexacom IPO . As per management, while there is significant growth at EBITDA level, due to one time accounting adjustment before the IPO, it has posted lower net profits for FY23 as well as 9M-FY24. Considering this IPO pricing leaves some margin. Anchor response is good and it may witness good QIB demand as institution can pick up a sizeable chunk of shares. Bharti Hexacom Limited price could be pegged with Bharti Airtel price.
- GMP as reported on social media has been Rs. 60.
- Standard disclaimer: I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . I have in the past cleared some exams like NISM-Series-V-A: Mutual Fund Distributors Certification, NISM-Series-X-A: Investment Adviser (Level 1) Certification and NISM-Series-X-B: Investment Adviser (Level 2) Examination. This post is my view on the subject matter and is only academic and exploratory in nature. It is not meant to influence investment decisions of investors. I may have bias/vested interest in covered Stock/Mutual Funds/NCD etc. due to my own investment or leaning. Further my understanding of the areas on which I write may be imperfect or incomplete and data could be wrong due to limited time and resources at my disposal. Do check the data from company’s RHP and exchanges before making any decision. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.