Bharti Infra issue price fixed at R210 for retail investors

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SummarySaid to have raised R4,150 cr through sale of 10% equity.

Bharti Infratel, a subsidiary of Bharti Airtel, on Monday fixed the issue price for its IPO at R220 for institutions and wealthy investors, and Rs 210 for retail investors — the lower end of the price band. Through discussions with merchant bankers and sources familiar with the matter, the company is believed to have raised approximately R4,150 crore through the sale of 18.89 crore shares or 10% of equity.

The Delhi-based telecom major is believed to have allotted around 14.75-14.9 crore shares to qualified institutional buyers (QIBs) and high networth individuals (HNIs), stated merchant bankers, who did not wish to be identified.

On BSE, shares of Bharti Airtel declined 3.69% or R11.50 from Friday's close to end at R300.45. The company, which had targeted to raise R4,500 crore through its IPO, received 1.3 times the subscription.

According to exchange data, the QIB portion was oversubscribed 2.84 times. The issue received tepid response from non-institutional and retail investors, who subscribed just 29% and 19%, respectively.

Interestingly, the issue price is lower than the price at which anchor investors were allotted shares just a day before the IPO opened. The company allotted 2.83 crore shares at R230 a share to anchor investors that include Sundaram Mutual Fund, Columbia Wanger, Alliance Bernstein, Citigroup, Morgan Stanley and Clough Cap.

While company officials working on the IPO did not wish to comment on the price, market experts and brokerages expressed mixed reaction to the pricing. Market experts said the issue was fairly priced towards the lower end of the price band based on valuations.

“We believe that the lower end of the price band is close to the fair zone and leaves little upside on the table for an investor given the muted growth expectation, free cash flow yield of ~5% and current ebit/tenant of only $2,600 per annum. We do not see significant listing gains,” said analysts Hiten Shah and Abhishek Gupta, IDFC Securities in their research report.

Many brokerages, including IDFC Securities, had advised clients to subscribe at the lower end of the price band, while a few others had recommended clients to avoid subscribing to the issue due to high valuations.

For instance, Ambit Investment Advisory had stated that the company valuations were expensive at 10-12x FY14 EV/Ebitda and 38-44x FY14 earnings, considering its poor economics with global peers and expectations of mid-single-digit growth over FY12-FY14.

“Bharti Infratel's valuations are expensive. If the IPO were priced at R140-170 (rather than

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