As the wait for the telecom sector?s most anticipated initial public offering (IPO) ? that by Bharat Sanchar Nigam Limited (BSNL) ? gets longer, many smaller telecom players have decided to hit the capital markets. These include telecom cable manufacturer Shilpi Cable Technologies, value-added service provider One97 Communications, internet service provider YOU Broadband & Cable India Limited, and handset maker Micromax. A look at the upcoming IPOs in the telecom space…
Micromax
With its planned IPO of Rs 6 billion-Rs 8 billion, Micromax will become the first domestic handset maker to go public. The Gurgaon-headquartered company has appointed Citigroup Global Markets, Edelweiss and JP Morgan as the lead bankers for the public offering.
In what appears to be a pre-IPO investment, Micromax has raised Rs 2 billion from three investors ? Sequoia Capital, Sandstone Capital LLC and Madison India Capital. This is the second private equity placement in Micromax after TA Associates acquired a minority stake in the company for Rs 2.25 billion in January 2009.
A low-cost handset manufacturer, Micromax started operations in 2002 as an embedded software and e-commerce solutions company, but came into prominence only after it entered the handset business in 2008. It now has a presence in 23 states, and a sales network in Nepal, Sri Lanka and Bangladesh.
The company, which is estimated to have a handset market share of 4.3 per cent, reportedly registered revenues of Rs 16 billion and net profit of Rs 1.5 billion in 2009-10. It claims to be selling 1 million phones a month through 45,000 retail points in 120 cities across India.
YOU Broadband & Cable India Limited
Citigroup Venture Capital (CVC)-backed cable broadband service provider YOU Broadband & Cable India Limited is looking to raise Rs 1.2 billion through its IPO and has filed its draft red herring prospectus (DRHP) with the Securities and Exchange Board of India (SEBI). The Noida-based company is awaiting the approval from the market regulator for the proposed listing. Originally owned by British Gas, the company was acquired by CVC in 2006 and has already invested an estimated over Rs 3 billion through a string of fresh issues and allotments against amalgamations.
One97 Communications
Noida-based One97 Communications filed its DRHP with SEBI in May 2010, and is awaiting the market regulator?s approval. It plans to hit the capital market by this year-end with an IPO of Rs 1.2 billion. IDFC Capital and Avendus Capital are the bookrunning lead managers to the issue.
The IPO proceeds will be mostly invested in technology deployment to launch new services and scale up the company?s current offerings both in India and overseas. It plans to allocate a significant portion of this amount towards its overseas expansion.
One97, founded by Vijay Shekhar Sharma and backed by venture capital investors such as Intel Capital, Silicon Valley Bank and SAIF Partners, offers services under three categories ? network, consumer and enterprise.
The company expects the upcoming rollout of 3G services in the country to be a landmark development that will help it generate greater revenues in the future. One97 reported revenues worth Rs 407 million in 2007-08, which doubled to Rs 814 million in 2008-09. For the first three quarters of 2009-10, the company reported revenues of Rs 867.5 million with a profit before tax (PBT) of Rs 202 million.
Shilpi Cable
A manufacturer of radio frequency cables, Shilpi Cable has filed its DRHP with SEBI for an IPO worth Rs 558.8 million. The Delhi-based company will use the IPO proceeds to set up a wire and cable assembly facility, augment its cable manufacturing capability, expand its product portfolio and manufacture cables for 3G networks. It will also use the funds to invest in its subsidiary, Shilpi Cabletronics Limited.
In 2009-10, the company registered a turnover of Rs 1.7 billion and a PBT of Rs 149 million. With this segment poised for exponential growth over the next few years, the company?s prospects seem bright. It expects to double its turnover and net profit over the next two years.
Shilpi Cable has recently set up a new division to cater to the passive telecom infrastructure space. ?This division will look after the operations and maintenance of networks, and also be active in the in-building wireless solutions space,? says a senior company official.
Going forward, the company is reportedly looking to explore opportunities in Africa and the Middle East, where there is a potential market for its products and services.
