Cable television and broadband service provider GTPL Hathway’s IPO has been subscribed 41% on the first day of bidding. Of their respective quota of reserved shares, institutional investors have bid 68% while retail investors have bid 36% while non-institutional investors have bid a mere 15%.
The issue will raise up to Rs 485 crore, comprising a mix of Rs 240 crore via fresh issue of shares and the remaining through an offer-for-sale (OFS) of up to 1.44 crore shares in a price band of Rs 167-170 per share with a lot size of 88 and in multiples thereof. The retail allocation will be 35% and the proceeds from the IPO will be utilised towards repayment of loans and other general corporate purposes.
Hathway Cable and Datacom Ltd will sell 72 lakh shares, 54.8 lakh shares will be offered by Gujarat Digi-Com Pvt Ltd while MD Aniruddhasinhji Jadeja plans to sell 11.3 lakh shares. Company’s promoter Kanaksinh Rana will sell 4.4 lakh shares while full-time director of the company, Amit Shah, will offload 1.44 lakh shares. The book-running lead managers to the offer are JM Financial Institutional Securities, BNP Paribas, Motilal Oswal Investment Advisors and YES Securities.
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The company has been performing well on the revenue growth front and has seen its top line increasing from Rs 528.8 crore in FY2014 to Rs 746.2 crore in the year ended 31 March 2016. Notwithstanding the top line growth, GTPL Hathway’s profitability has been volatile and it even posted losses in FY2014 on a consolidated basis. After recovering in the subsequent year, its profits dived again in FY2016.
In terms of valuations, the IPO price band of Rs 167 – 170 per share values the company at the price/earnings (P/E) ratio of 20.6 – 21.0. It has a decent Return on Net Worth (RONW) of 14.87% on a consolidated basis. To be fair to GTPL Hathway, it has the distinction of being one of the few profitable plays in the industry. However, many brokerage houses have expressed concerns over the company’s future growth, citing the rapidly evolving technological environment in which the company operates and tough competition from peers.