Bharti Hexacom IPO Set for April 3rd Launch, TCIL’s Stake to Drop to 15%

Bharti Hexacom, a subsidiary of Bharti Airtel, India's second-largest telecom operator, is gearing up to launch its initial public offering (IPO) on April 3rd, 2024. The much-awaited IPO marks the beginning of the 2024-25 fiscal year and is expected to generate significant interest from investors.

The Bharti Hexacom IPO will be an offer for sale (OFS), where the existing shareholders will offload a portion of their stakes. Telecommunications Consultants India Ltd (TCIL), the sole public shareholder in the company, plans to divest a 15% stake, equivalent to 7.5 crore equity shares.

Stake Realignment

Currently, Bharti Airtel, led by Sunil Mittal, holds a 70% stake in Bharti Hexacom, amounting to 35 crore shares. TCIL, a state-run entity, owns the remaining 30% stake, comprising 15 crore equity shares. After the IPO, Bharti Airtel's stake will remain unchanged at 70%, while TCIL's ownership will be halved to 15% and the IPO is set to close on April 5.

Based on valuation and phased divestment, the public sector firm TCIL aims to achieve a valuation target range of Rs 28,000 crore to Rs 35,000 crore for Bharti Hexacom through a gradual divestment process. The current IPO represents the first phase of this strategic offloading of equity.

Regional Footprint

Bharti Hexacom operates mobile services in the Rajasthan and Northeast circles of India. The Northeast telecommunication circles encompass the states of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and Tripura.

According to the company's filings, Bharti Hexacom has witnessed a steady improvement in its average revenue per user (ARPU), increasing from Rs135 in FY21 to Rs 195 during the six-month period that ended September 2023. As of September 2023, the company boasted a customer base of 29.1 million across both circles.

Spectrum Holdings and 5G Capabilities

Bharti Hexacom's diverse spectrum portfolio, encompassing mid-band frequencies, positions the company advantageously in the burgeoning 5G landscape, enabling it to deliver cutting-edge 5G plus services to its clients collectively. While the company witnessed a revenue surge from Rs 3,167 crore to Rs 3,420 crore for the six-month period concluding in September, profits took a dip, plummeting from Rs 195 crore to Rs 69 crore compared to the preceding year.

Renowned financial institutions, including SBI Capital Markets, Axis Capital, BOB Capital Markets, ICICI Securities and IIFL Securities, have been entrusted with the pivotal role of book-running lead managers for Bharti Hexacom's impending initial public offering (IPO). Their involvement underscores the IPO's significance and the company's commitment to upholding stringent standards of corporate governance.

Investor Confidence and Market Reception

The Bharti Hexacom IPO is expected to generate significant interest from investors, given the strong brand recognition of Bharti Airtel and the company's presence in the high-growth telecom sector. Market analysts anticipate a positive reception, considering the company's potential for future growth and the opportunity to gain exposure to the 5G rollout across India.

As the IPO opens on April 3rd and closes on April 5th, investors will closely monitor the subscription levels and pricing, which will ultimately determine the success of this highly anticipated public offering.