IPO listed on 12 Apr'24
Bharti Hexacom Ltd
Minimum Investment
₹ 14,820 / 26 shares
Grey market premium
₹ 56 (10% premium)
Issue price
₹ 570
Listing price
₹ 755
Listing gains
185 (32%)
Listing on
Apr 12, 2024
Our Verdict:
Avoid
- While Bharti Hexacom enjoys a dominant market position and a solid customer base, along with impressive revenue growth and increasing profit margins, there are notable concerns that warrant attention. The firm confronts challenges such as inconsistent earnings, significant legal issues, potential financial obligations, and considerable indebtedness, all of which could negatively impact its financial stability and performance post-listing.
- Moreover, the IPO valuation appears to be elevated, with a Price-to-Earnings (P/E) ratio of 76x based on annualized FY24 earnings against the post-IPO fully diluted paid-up equity capital.
- The firm's growth prospects seem limited as it operates only in two regions without immediate plans for expansion. Furthermore, it operates in a highly competitive industry where any resurgence of price wars could severely affect its financial performance.
- Given these considerations, it might be prudent for investors to refrain from participating in the IPO, as the potential risks outweigh the rewards. Investors should wait and monitor the firm’s financial performance in the ensuing quarters before making investment commitments.
About the company
Founded in
20 Apr'95
Managing director
Jagdish Deepak
- Bharti Hexacom Ltd (BHL) operates as a subsidiary of Bharti Airtel, holding a 70% ownership stake. Specializing in communication solutions, it caters to consumer mobile, fixed-line telephone, and broadband services within the Rajasthan and North East telecommunication circles in India, encompassing states like Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland, and Tripura. These services are marketed under the renowned brand 'Airtel.'
- With an expansive reach, BHL boasts an extensive distribution and service network, boasting 51 retail outlets and 24 smaller format stores, spanning across 90 cities as of December 31, 2023. Furthermore, its distribution network encompasses 616 distributors and 89,454 retail touch points.
STRENGTHS
- Dominant Market Position: BHL holds the market leader position and boasts a substantial customer base in its operational regions (Rajasthan and Northeast). The firm commands a revenue market share of approximately 40.4% in Rajasthan and 52.7% in the Northeast, with customer market shares of 35% and 49.8%, respectively, for the nine months ending December 31, 2023.
- Impressive Financial Growth: BHL has shown a strong and consistent financial growth, with a Compound Annual Growth Rate (CAGR) of 20% in operational revenue from FY21 to FY23. This period also saw a significant uptick in EBITDA by 59%.
- Rising Profit Margins: BHL has seen a steady increase in its operating profit margins, with EBITDA margin rising from 24.71% in FY21 to 43.90% in FY23, and further climbing to 49.35% by December 2023.
- Significant ARPU Growth: The Average Revenue Per User (ARPU) for mobile services has experienced considerable growth, escalating from Rs 135 in FY21 to Rs 185 in FY23, and further increasing to Rs 197 by December 2023.
RISK FACTORS
- Inconsistency in Earnings: BHL had suffered losses in FY21 when there was price war among telcos. Despite a financial turnaround in FY22 and continued growth in revenue, its profit fell again in FY23. However, management attributes this decline to a one-time accounting adjustment preceding the IPO.Geographical Concentration: BHL heavily relies on revenue generated from mobile telephone services in Rajasthan and the Northeast circle. Any adverse developments in these regions could potentially harm the company's operations.
- Legal Risks: BHL and its promoter are involved in ongoing legal proceedings, with amounts totalling Rs 2,405.5 crore and Rs 37,004 crore, respectively. Unfavourable outcomes in these cases could negatively impact the firm’s financial stability.
- Potential Financial Liabilities: BHL faces potential financial liabilities, with contingent liabilities recorded at Rs 275.3 crore for the nine months ending December 31, 2023. These liabilities, if realized, could negatively impact its financial health and profit margins.
- Significant Indebtedness: BHL has accumulated significant debt, with a debt-to-equity ratio of 1.4 times as of December 31, 2023. Managing this debt and adhering to lender covenants are crucial to prevent defaults and mitigate refinancing risks. Additionally, the firm requires substantial capital for capital expenditure. Failure to secure additional capital could adversely affect its business.
Financials
All Values are in Cr.
Issue details
Issue type
Mainstream
Issue size
₹ 4,275 crore
Fresh Issue
₹ -
OFS
₹ 4,275 crore
Price range
₹ 542 - 570
Lot size
26 shares
Issue Objective
This issue is solely an Offer for Sale (OFS), indicating that none of the proceeds from the issue will be retained by the company. Instead, they will be directed to the selling shareholders.
Dates
Bidding open
3 Apr'24
Bidding close
5 Apr'24
Allotment date
8 Apr'24
Refund date
10 Apr'24
Listing
12 Apr'24
IPO Reservations
Qualified institutional buyers
>75%
Non-institutional investors
<15%
Retail individual investors
<10%
Read the Offer Document
© 2025 by Liquide Solutions Private Limited, SEBI Registered Research Analyst (Registration number - INH000009816)
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