Bharti Hexacom Limited IPO Review
Bharti Hexacom Limited, a subsidiary of Bharti Airtel, is a significant player in the Indian telecommunications sector. The company's journey began in 1995 under the name 'Hexacom India Limited' and was later rebranded to Bharti Hexacom Limited after Bharti Airtel acquired a majority equity interest in 2004.
The company is part of the Bharti Enterprises group, founded by Sunil Bharti Mittal. Under his leadership, Bharti Enterprises has grown into one of India's leading business conglomerates, with interests in telecom, insurance, real estate, education, malls, hospitality, agri-business, and food. Sunil Bharti Mittal's vision and entrepreneurial spirit have been the driving force behind the group's success.
Originally incorporated in Delhi, the national capital territory of India, Bharti Hexacom has expanded its operations significantly. The company provides mobile services, fixed-line telephone, and broadband services, primarily in the Rajasthan and North East regions, covering states like Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura.
The inception of Bharti Hexacom was driven by the need to provide quality telecommunication services in regions that were underserved at the time. The company aimed to bridge the digital divide and enhance connectivity in these areas, fostering growth and development. This mission aligned with the broader vision of Bharti Enterprises to create a transformative impact on society through innovation in telecommunications.
The rationale behind starting Bharti Hexacom was to tap into the potential of the burgeoning telecom market in India, especially in regions that lacked adequate services. By offering reliable and affordable communication solutions, Bharti Hexacom aimed to empower individuals and businesses in these areas, contributing to the overall economic progress of the country.
Today, Bharti Hexacom continues to thrive as a testament to the foresight of its founders and the enduring commitment to connecting people across India. With a robust infrastructure and a customer-centric approach, the company is well-positioned to navigate the dynamic landscape of the telecommunications industry. As it moves forward, Bharti Hexacom remains dedicated to innovation, quality, and inclusivity, ensuring that it remains at the forefront of India's digital revolution.
Competitive Strengths
Bharti Hexacom Limited, a subsidiary of the telecom giant Bharti Airtel, has been a significant player in the Indian telecommunications sector. With its upcoming IPO in 2024, the company has garnered attention for its competitive strengths that position it well in a dynamic market. Here's an analysis of the key competitive advantages that Bharti Hexacom holds:
Revenue, Sales, and Profit
Bharti Hexacom Limited, a prominent player in the Indian telecom sector, has demonstrated a robust financial performance in recent years. For the fiscal year ending March 31, 2022, the company reported a significant increase in revenue, amounting to Rs. 54,940 Million, compared to Rs. 47,043 Million in the previous fiscal year. This revenue growth can be attributed to the company's diversified service offerings, including mobile, voice, and data solutions, which have resonated well with the consumer base in Rajasthan and North East Circles, where it operates as one of the largest mobile service providers.
In terms of profit, Bharti Hexacom Limited has also shown remarkable performance. The net profit for the quarter ending December 2023 saw a 39.84% increase to Rs 212.70 crore from Rs 152.10 crore in the corresponding quarter of the previous year. Sales during this quarter rose by 7.21% to Rs 1800.60 crore, up from Rs 1679.50 crore in the previous quarter ended December 2022. These figures indicate a strong upward trajectory in the company's profitability, showcasing its ability to capitalize on market opportunities and maintain growth momentum.
Furthermore, the company's full-year revenue for FY23 stood at Rs 6,579 crore, marking a 22% increase on an annual basis. The net profit reported at the end of September 2023 was Rs 69.1 crore, compared with Rs 195.2 crore in the six months ended September 2022. This demonstrates the company's resilience and strategic agility in navigating the dynamic market conditions, including the challenges posed by the COVID-19 pandemic.
Distribution Network and Geographical Reach
Bharti Hexacom Limited, established in 1995 and later acquired by Bharti Airtel in 2004, operates extensively in the telecommunications sector. With a robust distribution network, the company has made its presence felt across Rajasthan and the Northeastern states of India, including Arunachal Pradesh, Mizoram, Manipur, Nagaland, Meghalaya, and Tripura. As of December 31, 2023, Bharti Hexacom's infrastructure includes 24,874 network towers, out of which 5,092 are owned, supporting a spectrum portfolio that facilitates both 4G and 5G services. This strategic asset mix allows for a cost-effective and rapid deployment of services across these regions. The company's geographical reach is further bolstered by a strong distribution network comprising 616 distributors and 89,454 retail touchpoints, ensuring a wide and accessible customer base. Additionally, Bharti Hexacom's digital prowess is evident with 19,144 thousand data customers, a significant number of whom utilize advanced 4G and 5G services. This extensive network and customer-centric approach have positioned Bharti Hexacom as a key player in driving the digital transformation in the Indian subcontinent.
Unique Features
Bharti Hexacom Limited, a subsidiary of Bharti Airtel, operates in the dynamic telecom sector of India, specifically within the Rajasthan and North East telecommunication circles. As a communications solutions provider, it offers a range of services including consumer mobile services, fixed-line telephone, and broadband services. The company has carved a niche for itself by focusing on these specific regions, catering to a substantial customer base with tailored services that address the unique needs of these areas. With a strategic emphasis on acquiring and retaining high-value customers, Bharti Hexacom has established a robust market position. This is evidenced by its large customer base of approximately 2.91 crore as of September 30, 2023, and its recent decision to go public, which is expected to value the company at over ₹28,000 crore. The IPO is a significant step for Bharti Hexacom, indicating its growth trajectory and the confidence of its stakeholders in its business model and future prospects.
Investment in Research and Development
As of December 31, 2023, the company has allocated a substantial amount of Rs. 206 billion towards capital expenditure to enhance its future-ready digital infrastructure. This investment underscores the company's commitment to innovation and technological advancement, ensuring it remains at the forefront of the telecommunications industry. The focus on R&D has enabled Bharti Hexacom to expand its network significantly, with over 23,000 towers to its credit, providing robust consumer mobile services, fixed-line telephone, and broadband services across key regions in India. This strategic investment in R&D not only strengthens their service offerings but also aligns with their objective to premium their portfolio, acquire quality customers, and deliver an exceptional omnichannel experience through data science and digital offerings. The synergy with Airtel's expansive digital infrastructure further enhances its capability to offer differentiated and customized services, contributing to a continuous improvement in its revenue market share. Such dedicated investment in R&D is indicative of Bharti Hexacom's long-term vision for growth and sustainability in the competitive telecommunications sector.
Bharti Hexacom Limited IPO Details
Issue Date: The issue date in an IPO, also known as the initial offering date, is when a company's stock is first made available for public purchase. This date is a significant milestone in the process of an initial public offering, marking the transition of a company from private to public status. (Issue Date: April 3, 2024 to April 5, 2024).
Listing Date: The listing date refers to the day when the company's shares are officially listed and begin trading on a stock exchange. This is typically several business days (3-6 days) after the issue date after processes like share allotment and finalization are completed. On this date, investors who were allotted shares during the IPO can begin selling them, and new investors can start purchasing them on the exchange at the prevailing market price. (Listing Date: Friday, April 12, 2024).
Face Value of Shares: The face value of shares in an IPO, also known as the nominal or par value, is a predetermined fixed price set by the company and mentioned in its memorandum of association. It represents the initial capital contributed by the founders and is used for accounting and regulatory purposes. During an IPO, shares are typically offered at a price higher than the face value, which includes a premium based on market demand and the company's performance indicators. (IPO Face Value: ₹5 per share).
Price Band: A price band of an IPO is the range of prices within which the investors can bid for the shares of a company that is going public. The price band is set by the issuer and the lead managers of the IPO, based on various factors such as the demand and supply of the shares, the financial performance and valuation of the company, and the market conditions. (IPO Price: ₹542 to ₹570 per share).
Lot Size: In an Initial Public Offering (IPO), the lot size refers to the minimum number of shares an investor can apply for. It is a pre-determined set of shares that investors must bid for, and applications must be in multiples of this lot size. The lot size ensures a standardized bidding process and helps in the fair allocation of shares among investors. (Lot Size: 26 Shares).
Total Issue Size: The total issue size represents the total number of shares the company is offering to raise capital through the IPO. This number is determined by the company and its advisors, considering factors like their funding needs and the expected investor demand. The total issue size is then divided by the lot size to determine the total number of lots available for purchase by investors. (Total Issue Size: 75,000,000 shares (aggregating up to ₹4,275.00 Cr)).
Offer for Sale: The offer for sale, which is the amount and type of shares that the company is selling to the public. The offer for sale can be either primary or secondary, or a combination of both. A primary offer for sale means that the company is issuing new shares and raising fresh capital. A secondary offer for sale means that the existing shareholders are selling their shares and receiving the proceeds. A combination offer for sale means that both new and existing shares are being sold. (Offers for Sale: 75,000,000 shares (aggregating up to ₹4,275.00 Cr)).
Issue Type: The type of an IPO can vary depending on the market and regulatory conditions. Some of the common types of IPOs are, Fixed priced IPO, Auction IPO, Book Building IPO, and Hybrid IPO. (Issue Type: Book Building IPO).
Listing At: The listing of shares in an IPO refers to the process where a company's shares are introduced to the public stock market, allowing investors to buy and sell the shares through a stock exchange. Once listed, anyone with a brokerage account can buy and sell the company's shares on the exchange. (Listing at: BSE, NSE).
Retail Shares Offered: This refers to the portion of the total shares being made available specifically for individual investors, distinct from institutional investors like banks or hedge funds. Regulatory bodies often mandate a minimum percentage of shares be reserved for retail investors, aiming to promote broader public participation in the capital markets. (Retail Shares Offered: Not more than 10% of the Net Issue).
QIB Shares Offered: QIBs are institutional investors such as banks, mutual funds, insurance companies, pension funds, etc., who have expertise and financial resources to invest in the securities market. They are considered as informed and sophisticated investors who can assess the risks and returns of an IPO. QIBs can bid for up to 50% of the total shares offered in an IPO via the profitability route, or up to 75% of the total shares offered in an IPO via the QIB route. QIBs have to pay only 10% of the bid amount at the time of application, and the rest after the finalization of the basis of allotment. (QIB Shares Offered: Not More than 75% of the Net Issue).
NII (HNI) Shares Offered: NII stands for Non-Institutional Investors, which includes High Net-worth Individuals (HNIs) who bid for shares worth more than ₹200,000. The NII category is reserved for investors who do not fall under the retail or Qualified Institutional Buyers (QIBs) categories. Typically, a certain percentage of the IPO, usually around 15%, is allocated for NIIs to ensure a wider distribution of shares. HNIs within the NII category often have a higher chance of allotment compared to retail investors, making it an attractive option for those looking to invest larger sums in an IPO. (NII (HNI) Shares Offered: Not more than 15% of the Net Issue).
Competitors of Bharti Hexacom Limited
Bharti Hexacom Limited, a prominent player in the telecommunications sector, operates in a highly competitive environment. The company faces stiff competition from various other entities that vie for market share in this dynamic industry.
One of the primary competitors of Bharti Hexacom Limited is Reliance Jio Infocomm Limited, known for its aggressive market strategies and extensive 4G network coverage. Another significant competitor is Vodafone Idea Limited, which has a strong presence in both urban and rural markets and offers a wide range of services including voice, data, and digital services.
Airtel, part of Bharti Enterprises, also competes in the same space, providing similar services such as mobile operations, broadband, and enterprise services. Additionally, state-owned BSNL (Bharat Sanchar Nigam Limited) and MTNL (Mahanagar Telephone Nigam Limited) are competitors, especially in the fixed-line and internet services segments.
The competition extends beyond traditional telecom services to include companies offering Over-The-Top (OTT) services, which have been gaining popularity. Companies like Netflix, Amazon Prime, and Hotstar compete for the digital content market, indirectly affecting the revenue streams of telecom operators.
In the enterprise segment, Bharti Hexacom Limited competes with global players such as Tata Communications and Sify Technologies, which provide a range of services including cloud computing, data center services, and enterprise networking solutions.
The competitive landscape is further complicated by the rapid technological advancements and the introduction of new services like 5G, IoT (Internet of Things), and AI (Artificial Intelligence) based solutions, where companies like Samsung, Huawei, and Ericsson are also key players.
To maintain its competitive edge, Bharti Hexacom Limited continuously innovates its service offerings, expands its network coverage, and provides value-added services to cater to the evolving needs of customers. The company's ability to adapt to market changes and consumer demands plays a crucial role in its success against its competitors.
Conclusion
In conclusion, the Bharti Hexacom Limited IPO presents a significant event in the telecommunications sector, reflecting the company's growth trajectory and future potential. With a substantial issue size and a strategic price band, the IPO has garnered attention from various investor segments, including QIBs, NIIs, and retail investors. The company's decision to reduce the issue size and the subsequent grey market premium indicate a nuanced market perception. As the IPO date approaches, potential investors are advised to consider the company's financial performance, market position, and the broader economic context. Bharti Hexacom's journey from a regional player to a participant in the national market is a testament to its operational strengths and strategic initiatives. The IPO not only offers an opportunity for the company to raise capital but also allows investors to be part of Bharti Hexacom's evolving story in the Indian telecom landscape.
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Disclaimer: This is not an investment advisory. The article above is for information purposes only. Investments in the securities market are subject to market risks, read all the related documents carefully before investing. Please consider your specific investment requirements, risk tolerance, goal, time frame, risk and reward balance, and the cost associated with the investment before choosing securities, that suit your needs. The performance and returns of any equity stock can neither be predicted nor guaranteed.
FAQs
Q: What is an IPO?
An Initial Public Offering (IPO) is the first time a company offers its shares for sale to the public on a stock exchange. This allows the company to raise capital for growth and expansion.
Q: How can I apply for an IPO?
There are two main ways to apply for an IPO:
Retail Investor: You can apply through your trading broker using a Demat account and ASBA facility (explained below).
Institutional Investor: Large investors like banks and mutual funds have a separate application process.
Q: What is ASBA?
ASBA (Application Supported by Blocked Amount) is a safe and convenient method to apply for IPOs. With ASBA, the funds you bid for the IPO are blocked in your bank account and only debited if your bid is successful. This prevents unsuccessful applicants' money from being tied up.
Q: What is the difference between a fixed-price and a book-building IPO?
Fixed-Price IPO: The company sets a fixed price for the shares offered in the IPO.
Book-Building IPO: The price of the shares is determined based on investor demand during a bidding process.
Q: What are the risks involved in investing in IPOs?
New companies: IPOs often involve young companies with limited track records, so there's a higher risk of their stock price being volatile.
Overvaluation: Some IPOs can be overvalued, leading to a potential drop in share price after listing.
Q: How much should I invest in an IPO?
IPO investments should be a part of a diversified portfolio. Only invest what you can afford to lose, considering the inherent risks involved.
Q: What happens after I apply for an IPO?
The company allocates shares based on the bids received. You will be notified if your application is successful or not. The shares will then be credited to your Demat account after the listing date.
Q: When should I sell my IPO shares?
This is a personal decision based on your investment goals and risk tolerance. Some investors hold for the long term, while others may sell soon after listing to capture potential gains.
Q: Where can I find information about upcoming IPOs?
Many financial websites and brokerage firms provide information on upcoming IPOs, including issue details, timelines, and prospectuses.
Q: What are the tax implications of investing in IPOs?
Short-term capital gains tax applies to IPO shares sold within one year of purchase. Long-term capital gains tax applies if held for over a year, and the rates may vary depending on the country's tax regulations.
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