Bharti Hexacom IPO Review 2024

Bharti Hexacom IPO Review 2024: Bharti Hexacom is facing an IPO issue of Rs. 4,275 Cr will commence on April 3, 2024. The issue closes on April 5 and will be listed on the exchange on April 12, 2024. In this article, we analyze the financials, GMP, strengths and weaknesses of Bharti Hexacom Limited IPO Review 2024. Read on to find out!

Bharti Hexacom IPO Review – Company Overview

Let’s take a closer look at the company profile of Bharti Hexacom IPO Review. Bharti Hexacom is a telecommunication service provider offering consumer mobile services, landline and broadband services under its brands. airtel. The company is present in the northeastern states of Arunachal Pradesh, Mizoram, Manipur, Nagaland, Meghalaya and Tripura.

Founded in 1995, the company was originally incorporated as a company. Hexacom India Ltd.. In 2004, it was acquired by Bharti Airtel and its name changed. Bharti Hexacom Ltd. As of this RHP filing, Bharti Airtel owns 70% stake in the company. The remaining 30% is owned by the Government of India through Telecommunications Consultants India Ltd. (TCIL).

It is an engineering and consulting firm that provides expertise in telecommunications and IT to developing countries around the world. Today, Bharti Hexacom offers telecom services as Airtel in a synergistic manner to its customers. These services include enhanced customer engagement and customized family plans as part of the Airtel Black offer.

The company operates a robust network infrastructure with a mix of owned and leased assets. As of December 31, 2023, the Company operated 24,874 network towers, of which 5,092 were owned. We also have a spectrum portfolio of mid-band spectrum architecture in (1800/2100/2300 MHz bands).

These towers are built on a non-standalone basis, allowing the same architecture to be used for both 4G and 5G. This lowers the cost of ownership and enables faster deployment of infrastructure across the country.

Industry Overview

Another part of the Bharti Hexacom IPO review is an overview of industries where rapid digital transformation is fundamentally reshaping the Indian economy. The key to this development is digital india The government launched in July 2015 to transform the country into a knowledge-based economy and a digitally empowered society.

A fast and reliable mobile communications network will help the government achieve its goal of Digital India. Technology upgrades such as Unified Payments Interface (UPI) and integration of several e-governance services into government-to-business (G2B) and government-to-citizen (G2C) applications have led to citizen empowerment.

The rise in UPI transactions can be attributed to the platform’s seamless integration with various banking systems and its compatibility with numerous third-party apps. The open architecture allows developers to develop innovative solutions and foster a robust ecosystem of UPI-enabled apps.

The telecommunications industry is capital-intensive and highly competitive. Players undertake mergers and acquisitions (M&A) not only to survive, but also to upgrade technology, expand customer base, and increase product diversification. Acquisitions in the sector primarily involve horizontal integration as companies gain market share by acquiring competitors.

Fewer market participants creates economies of scale and reduces redundant infrastructure. This reduces operating costs and allows for more efficient use of capital investments. In most major countries, between two and five telecom companies dominate the sector.

Global mobile traffic per customer increased from 0.6 GB/customer/month in 2013 to 21.0 GB/customer/month in 2023, a 35-fold increase in data consumption. Factors driving the growth in data traffic on mobile networks include increased demand for online digital services, 4G/5G deployment across telecom markets, and increased network capacity.

Bharti Hexacom IPO Review – Financials

Moving to the financials of the Bharti Hexacom IPO review, we see that Bharti Hexacom reported total revenue of Rs. 6,579 Cr in FY23, up 22% from Rs. 5,405 Cr in FY22. The company has continued to expand its revenue at a CAGR of 19.6% since FY21.

In terms of profitability, the company reported a 67% decline in revenue from Rs. 1675 Cr in FY22 to Rs. 549 Cr in FY23. This large decline in profits was a result of exceptional profits of Rs. 1951C in FY22. In FY23, the lack of these revenues resulted in lower returns.

The company posted a loss in FY21 due to high operating costs and exceptional losses. This shows that sales have been steady over the past three years, but performance has not kept up.

Bharti Hexacom IPO Review – Key Players

Now, let us take a look at the key players in Bharti Hexacom IPO Review, including its parent company Bharti Airtel. Bharti Hexacom has 3 associates out of which 2 are listed. Reliance Jio Infocomm is indirectly listed on the exchange along with its parent company Reliance Industries.

Bharti Airtel is the largest telecom company with a revenue of Cr 1.4 billion. Vodafone Idea continues to struggle as a loss maker, while Jio is earning around Rs. There are 4 shares per unlisted share.

As the industry remains a near-oligopoly (with struggling ideas), Bharti Airtel trades at a premium of 82x and has a return on book value of 15.8%. Bharti Hexacom is priced above Rs. 570, with a base EPS of Rs. 10.98 is valued at a price-to-earnings ratio of 51.91x.

Bharti Hexacom IPO Review – Strengths and Weaknesses

strength

1. Established leadership and large customer base: Hexacom has a strong market presence in Rajasthan and other parts of North East India. As of December 31, 2023, the company had a presence in 486 census cities and a total of 2.7 million customers.
2. Presence in high-growth potential markets: The teledensities of Rajasthan and northeastern India are only 79.5% and 79.7% respectively. The remote density in rural areas of Rajasthan is low at 57%. This presents a huge opportunity for the company to further strengthen its connectivity in the sector.
3. Strong affinity and strong brand presence: Its parent company Airtel is a global telecom provider with 50 Cr customers across 17 countries in South Asia and Africa. This, along with the parent company’s guidelines, provides a strong brand image for Bharti Hexacom’s business operations.
4. Building a future-ready network: As of December 31, 2023, Airtel has 9 Lakh mobile towers. Submarine cable and fiber optic connections are available throughout the country. This robust infrastructure enabled Airtel customers to consume 2.6 million minutes and 3.7 billion gigabytes of data during the year.
5. Extensive distribution and service network: In Rajasthan and the North East, the company has 616 dealers and 75 stores. These partners sell Airtel products and services through “Mitra App”. Consumers in the region can benefit from the seamlessly connected services that Airtel offers across India.

Weakness

1. Geographically concentrated risk: The company earns all its revenue through the sale of its services in Rajasthan and the North-Eastern region of India. Adverse developments in each market could have a significant impact on our business.
2. Inconsistent returns: Hexacom’s revenue has continued to grow, but the same can’t be said for its profits. Both FY21 and FY22 showed exceptional profits/losses that distorted the normalized revenue figures.
3. Failure to comply with SEBI regulations: The company failed to comply with SEBI’s capital issuance and disclosure requirements norms while reporting loss in FY21.
4. Regulatory issues regarding pricing: Telecom prices in India are subject to regulation in the form of minimum prices or price caps. A reduction in price caps could lead to a significant decline in the company’s ARPU and revenue.
5. High debt problem: The total outstanding debt as on December 31, 2023 is approximately Rs. 3772 Cr. The company’s debt-to-equity ratio is quite high at 1.48x as of FY23 and 1.41x as of December 31, 2023.

Bharti Hexacom IPO Review – GMP

Shares of Bharti Hexacom Ltd were trading at a premium of 6.14% in the gray market on Mar 26, 2024. The stock in Gray Market was trading at Rs 605. This gives a premium of Rs 35 per share over the ceiling price of Rs 570.

Bharti Hexacom IPO Review – Key IPO Information

promoter: Bharti Airtel Ltd

Book Operations Lead Manager: SBI Capital Markets Ltd, Axis Capital Ltd, BOB Capital Markets Ltd, ICICI Securities Ltd and IIFL Securities Ltd

Proposal registered by: KFin technology company

purpose of the problem

1. The entire issue will be an offer for sale that will enable the promoters to exit the stake at a profitable valuation.

conclusion

In conclusion, Bharti Hexacom IPO review presents various opportunities and challenges to potential investors. On the positive side, the company has a strong affiliation with Bharti Airtel, an established brand name. Hexacom also has a large customer base in its operating regions of Rajasthan and North East India.

These regions also offer high growth potential with relatively low remote densities, providing ample room for expansion. Bharti Hexacom is also leveraging its parent company’s extensive resources to build a future-proof network infrastructure.

However, the company faces several weaknesses and risks that cannot be overlooked. Because our business is geographically concentrated, we are exposed to local market dynamics. Its returns have been somewhat inconsistent in recent years, with its finances distorted by exceptional profits and losses.

Moreover, the company had previously reported loss in FY21, which failed to comply with SEBI regulations. Debt levels have also continued to decline since FY21, but currently remain at fairly high levels.

Investors should carefully evaluate these strengths and weaknesses, as well as the company’s valuation and growth prospects, before making an informed decision regarding participation in the Bharti Hexacom IPO.

Written by Nasir Hussein

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