Acme Tele Power Limited (ATPL), a Delhi-based telecom infrastructure and power solutions company, is among the new breed of telecom infrastructure companies reaping the dividends of the upswing in the mobile sector.
ATPL has a full order book and big expansion plans, much like Quipo, Xcel Telecom, GTL and Essar Infrastructure.The company recently announced its plan to launch an initial public offering (IPO) of 17.28 million equity shares of Rs 2 each and has submitted its draft red herring prospectus with the Securities and Exchange Board of India for this purpose.
Prior to the proposed issue, ATPL placed 2.85 million shares of Rs 2 each through a pre-IPO private equity placement with DB International (Asia), Earthstone Holdings and Kotak Mahindra Capital Company. The private placement represented 1.66 per cent of its expanded capital base.
The perceived profitability in this business has been making investors sit up and pay attention. For instance, in July 2007, when Reliance Communications (RCOM) divested 5 per cent stake in Reliance Telecom Infrastructure Limited (its infrastructure business), it did so for a staggering $337.5 million, valuing the company at $6.75 billion.
Similarly, a clutch of private equity players picked up a stake in GTL Infrastructure Limited (GIL), India’s largest standalone tower and telecom infrastructure company, for Rs 12 billion.
Thus, when ATPL entered the market there was no shortage of suitors. Although no deal materialised then, it did nevertheless push up the company’s valuation significantly. Recently, a private equity fund, Capital Partners, and a Delhi-based industrialist have bought a 5-7 per cent stake in ATPL for Rs 6-8 billion.
Given the current trend, ATPL’s proposed IPO is likely to generate a lot of interest. Experts say that, unlike the telephony business which is vulnerable to user behaviour and competitive tariffs, infrastructure is a more stable business with assured cash flows and profit margins as high as 60 per cent.
“We are targeting to raise about $300350 million through the IPO,” says Managing Director Manoj Upadhyay.”We are a business-to-business company, leading innovation in energy efficiency solutions and products for telecom operators, and are thus well known globally in the telecom sector. Our IPO is basically aimed at making us better known among the general public.”
Background
Strictly speaking, ATPL is not a telecom tower company. Its business model essentially involves providing energy saving solutions such as “green shelters” to telecom companies. Incorporated in 2003 as a consulting firm for providing energy solutions at telecom sites, it has grown to offer passive infrastructure solutions such as green shelters, power interface units, line conditioner units, thermal management systems with PCM AC with free cooling, heat exchangers, battery life enhancers, and lightning and surge protectors.
From a staff of five people, ATPL now employs 2,000 people in its four R&D centres, located in Europe, Canada and the US. The company also has two manufacturing facilities in Rudrapur, Uttarakhand and Parwanoo, Himachal Pradesh.
Thanks to the telecom boom, ATPL has seen its turnover rise from Rs 300 million in 2003 to Rs 6.47 billion in 2006-07.By March 2008, the figure is expected to shoot up to Rs 15 billion.
Growth strategies
The company appears to have thought out its growth strategies carefully and decided to focus entirely on addressing the pain points of the telecom operators.Its user base extends to companies such as Nokia, Ericsson, Bharti Airtel, Vodafone Essar, RCOM and Tata Teleservices Limited (TTSL).
According to the company, its solutions are widely used by Bharti Airtel and Vodafone Essar to help reduce the costs of maintaining devices that tackle power fluctuations. Each of ATPL’s products reduces the dependence on diesel generators for cooling requirements during power outages and provides stable power supply.
For instance, Bharti Airtel and ATPL have recently tied up for carbon credits.Selling carbon credits obtained by the telecom company’s sites will generate profits and half of these will go to ATPL.”There should be 2 kW per hour energy saved per site, which is tantamount to roughly 1.6 kg of carbon saved every hour. With 60,000 telecom sites running on this technology, there should be a total of 840,960 tonnes of carbon savings annually,” says Upadhyay.
While about 80 per cent of Airtel’s telecom sites have ATPL’s green shelters, Vodafone has a share of 35 per cent.TTSL and RCOM have 20 and 10 per cent respectively. The company is also in talks with Idea. Meanwhile, Vodafone UK is also talking to ATPL for $100 million worth of green shelters.
The way forward
Recently, ATPL bought a Czech fuel cell company for $50 million. The company is looking for opportunities in China, Vietnam and Latin America with the intention of acquiring a global presence in its core business. The company also plans to open branch offices in Africa.
Meanwhile, though not interested in entering the lucrative telecom tower business, ATPL was among the host of companies that recently applied for a universal access service licence for 12 telecom circles in the northern and western regions. Clearly, the company intends to increase its role and commitment in the telecom sector.
