ITI Limited FPO Review

ITI Limited FPO comprises a fresh issue of up to 18 crore shares and additional issue of up to 18 lakh equity shares reserved for allotment to eligible employees. basis. Through the ITI Limited FPO, the company is likely to raise around Rs 1,600 crore which it intend to use The objective of the issue would be to utilize the net proceeds for funding its working capital requirements and repay loans.

ITI Limited FPO Details

Issue opens24th January, 2020
Issue closesTuesday, 28th January, 2020
Issue DetailsFresh Issue of 181,800,000 Equity Shares
Issue Size (Rs. Cr)Rs.1,308.96– Rs.1,399.86 Cr
Price BandRs.72 – 77
Bid Lot150 Equity Shares 
Issue Structure : 
QIB75% of the net offer 
NIB15% of the net offer
Retail10% of offer (18,000,000 Equity Shares ) (₹ 138.60 Cr)
BRLMsBOB Capital, Karvy Investor Services, PNB Investment Services
RegistrarKFin Technologies Pvt Ltd


  • 28-01-20 Day3: FPO extended by 3 days, price band revised to ₹71-77 per share
  • 27-01-20 Day 2: Overall Subscription .09x, retail .5x

About ITI Limited

  • ITI, a public sector company under the Department of Telecommunications (DoT)
  • ITI has five manufacturing facilities at Mankapur, Rae Bareli , Naini in U.P., Bengaluru , and Palakkad (Kerala).
  • ITI Llimited has R&D centre in Bengaluru and 25 Marketing, Services & Projects (MSP) centers in India, which are located at Bengaluru, Bhubaneshwar, Chennai, Hyderabad, Kolkata, Lucknow, Mumbai, New Delhi and 17 other places spread across the country.
  • Originally ITI Limited focus was on Telcom products but with rapid changes in the field the company’s products quickly became non viable. Now the product portfolio of the company includes network products, defence security and other encryption products, set-top boxes, smart energy meters, smart cards and a host of services and AMC.

ITI Limited: Financials

Revenue 1408.391,668.371,484.161,548.14
Net Profit/Loss114.492.54230.56266.39
Equity Share Capital897897760560
Net worth-131.11-501.52-673.97-1,248.58
Long Term Borrowings240300300300
Short Term Borrowings957.71958.71926.32879.17
EPS (₹ )1.280.973.186.72
NAV (₹ )-1.46-5.59-8.87-22.3
Debt to Equity0.70.741.151.33
Post Issue Equity1078.8
IPO Price77
EPS (post IPO) annualized1.41
PE (Post IPO)54.46

ITI Limited FPO: Salient Points

  • The company was declared as sick Company in 2004.
  • The revival plan to restore the financial health of the company was approved by the Cabinet Committee on Economic Affairs (CCEA) in February 2014. As part of the revival plan, the GoI approved grants in aid to settle part of statutory dues and to meet its operational requirements and grants for capital expenditure.
  • Company has presence in a variety of fields and is dependent on Govt sector orders.
  • The objective of the issue is funding its working capital requirements (Rs 642.48 crore) and repay loans (Rs 607.29 crore), taken by the company.

ITI Limited FPO : Assessment

  • ITI Limited was originally a telecom product company and with rapid strides in technology its product rage quickly became obsolete.
  • For its survival the company has diversified into many areas which many times involves supply and installation of products sourced from other companies.
  • On account of this the company may not having any core competency and is dependent on a wide range of Govt orders secured from time to time in a variety of fields
  • Also as the company is now more dependent on projects rather than products, its business is quite working capital intensive as these turnkey projects involve incurring of substantial working capital. ITI Limited has high borrowings and also high debtors of 581.38 days .
  • ITI Limited has a order book of Rs 11,051.12 crore as on December 31, 2019 which includes various GoI projects such as ASCON, BharatNet, network for spectrum, smart energy meters, space programs and E-Governance projects.
  • The company is not allowed to declare any dividend on its equity and preference share capital until its entire outstanding statutory dues are fully cleared as per sanctioned revival scheme.
  • The company as on September 30, 2019, has outstanding statutory dues amounting to Rs 334.046 crore towards non-payment of provident fund and gratuity dues to the respective trusts.
  • Govt Holding in company stands at 90% before the issue and after the FPO it shall come down to little below 75% and this will lead to selling pressure in the scrip and current market rates could come under pressure.
  • On FY 19 EPS the shares being offed in ITI Limited FPO are at about 80 PE whereas based on annualized current 9 months results the PE still looks high at 54.5 x on the expanded equity share capital after the FPO. ITI Limite has a order book of Rs 11,051.12 crore as on December 31, 2019 which includes various GoI projects such as ASCON, BharatNet, network for spectrum, smart energy meters, space programs and E-Governance projects. This factor seems to sustain its high multiples.
  • With poor performance of PSUs, no core competency of company, past record of sickness, inability to even clear statutory dues and high valuations demanded I will stay clear of ITI Limited FPO even if it has been offered at a discount to existing market price. ITI Limited is commanding high multiples due to a sizable order book of Rs 11,051.12 crore which if executed properly can enhance its profitability.

Standard disclaimer:  I am not a SEBI registered analyst and above analysis is for educational purpose only. Iam a postgraduate in engineering & Management . Also Certified in 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. Please do your own due diligence as stock market/MF investments have high degree of inherent risk.

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