Bharti Hexacom Limited IPO - Get Date, Price, Review and Details

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In this article, we will disucss:

• About the Company
• Objectives of IPO
• Key Strengths and Opportunities
• Risks
• Financial Snapshot
• Conclusion

About the Company:

Bharti Hexacom Limited provides communication solutions, mobile, fixed-line telephone, and broadband services to customers in Rajasthan and the Northeast regions of India, including Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura. These services are provided under the brand name ‘Airtel’. The company focuses on attracting and keeping high-quality customers, providing them a seamless experience using various channels and data analysis. The company has digital options to make customer interaction better and offers unique plans like Airtel Black for families and converged plans. This approach has helped the company to increase its market share in revenue over the past three years. The company also focuses on cost efficiency and capital utilization to improve profitability. It continuously invests in network expansion, technology advancement, and judicious spectrum investments. As of December 31, 2023, it had invested Rs. 206 billion in building its digital infrastructure for the future. It also derives significant synergies from its relationship with its Promoter, Airtel, through the expansive digital infrastructure, digital experience, and the digital services it provides to its customers.

Objectives of IPO:

The company will not receive any of the offer proceeds as the entire issue is an offer for sale and hence it will be received by Telecommunications Consultants India Ltd (TCIL), the sole public shareholder in the company.

Key Strengths and Opportunities:

• Bharti Hexacom has established leadership and a large customer base in its area of operations which includes Rajasthan and North East communication circles in India. The company was in a leading position in the North East circle during the nine months ended December 31, 2023, and Fiscals 2023 and 2022. It has the highest number of VLR customers in the North East circle and the second-highest number of VLR customers in the Rajasthan Circle.
• Rajasthan’s focus on resolving regional imbalances and supporting growth in rural areas will create demand for telecom services in rural areas of the state, driving customer growth. The North East region is receiving special attention from the government towards infrastructure improvement. Both regions are expected to see an improvement in teledensity and adoption of smartphones in rural areas through investments in network infrastructure.
• The company derives significant synergies from its relationship with Airtel (Parent company) and its affiliates, including Indus Tower’s infrastructure. This has helped Bharti Hexacom to obtain better terms from the vendors and derive operational efficiencies by centralizing and sharing certain key functions such as finance, legal, procurement, and human resources.

Risks:

• Bharti Hexacom derives its revenues from providing mobile telephone services in Rajasthan and the North East circle. Any unfavorable developments in these regions could adversely affect its business, results of operations, and financial condition.
• There are outstanding legal proceedings involving the Promoter, in addition to the Company. An adverse outcome in any of these proceedings may adversely affect the reputation, business, financial condition, and results of operations.
• Telecom prices in India, or tariffs, are regulated by TRAI which also determines ceilings for various telecom services. Telecom tariffs in India have declined in the past, and while these have increased in recent years, may decline in the future on account of an increase in competition as the competitors are following an aggressive pricing strategy, and regulatory changes or intervention. Reduction in the company’s revenues due to regulatory ceilings on pricing, or owing to pricing pressure may reduce the average revenue per user (“ARPU”), adversely affecting the business and financial condition of the company.
• Any change in the relationship with its Promoter, Airtel, and its affiliates, may adversely affect the reputation, business, operations, and financial condition of the company.

Financial Snapshot:

Conclusion:

The company is being valued at a multiple of 52x based on its earnings per share (EPS) as of March 31, 2023, and the upper price band. Bharti Airtel, the parent company is trading at a P/E ratio of 63x. The average P/E ratio within the telecom industry is 40x. Hence, Bharti Hexacom Limited is currently fully priced. The company will not be receiving any of the offer proceeds as this is entirely an offer for sale. The current market conditions appear to be unfavorable due to the high volatility prevailing in the market. Given these factors, we recommend our investors AVOID subscribing to the Bharti Hexacom Limited IPO until both the company's financials and the overall market conditions demonstrate a more favorable outlook for investment.