Investor response to Bharti Infratel’s Rs 4,500 crore IPO this Tuesday will be key to Indian Telcos

Telecom infrastructure provider Bharti Infratel Limited is set to raise nearly Rs 4,500 crore from the share market on Tuesday.

More than 18 crore shares of the company owned by the Bharti Group will be sold in one of the largest public offerings the country has seen since the public offering of Coal India Limited in 2010.

The move that will test investor appetite for India’s cash starved telecom sector, is being watched by competitors as well as retail investors looking to buy into India’s mobile revolution.

According to analysts, one of the advantages the infrastructure provider has is that its owned by the Bharti group which operates Airtel, one of the country’s largest cellular services provider. Response to this IPO will be crucial to the cash starved industry looking for growth capital.

Funds raised from the IPO will be used to set up more than 1,000 new towers and upgrade or replace over 1,200 existing towers, says the company. It has also earmarked Rs 639 crore to take up green initiatives at tower sites, according to the papers filed by the company with the market regulator.

Indus Towers, state run BSNL, Reliance Infratel, GTL Infra, Viom Networks, Tower Vision and ATC are some of its competitors. Indus towers, its larger rival has more than a lakh towers installed in the country whereas Bharti Infratel operates about 70,000 towers.

“Avoid the issue on account of its premium valuations,” wrote Viral Shah and Ankita Somani in a report by Angel Broking. The over capacity in the industry added to regulatory uncertainties could inhibit growth, said the report.

According to Analysys Mason, the Indian wireless telecom services sector clocked a combined revenue of Rs 1361 billion at the end of March 2012. There are nearly 919 million mobile subscriptions in the country.

IPO Details
Face Value: Rs 10
Offer Size: 18.89 crore shares of Rs 10 face value
Post equity Paid up capital: Rs 188.6 cr
Issue size: Rs 3967 cr- Rs 4534 cr
Price band: Rs 210 – Rs 240

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