Bharti Tele-Ventures’ initial public offer has been one of the most keenly watched offerings for a host of reasons. First, it comes after a long period during which the very mention of an IPO drove investors away, singed as they were with non-performing paper which they had earlier subscribed to. Then there was the overall downturn in the economy which took its toll on capital markets. Hence, some quarters feel that the Bharti IPO has the potential of breathing life back into a comatose market. However, a few points need to be kept in mind. Mr Sunil Bharti Mittal, Bharti’s chairman and group managing director, undoubtedly has spearheaded a group that has made waves in the telecom market, starting with a cellular licence in Delhi and then expanding rapidly and spreading its footprint across the country. In the process, as has been recently seen, Bharti has also ushered in a major revolution in the long-distance telephony sector. While all this is excellent news for the consumer, the point which has to be kept in mind is that this revolution is itself a major challenge for the company which rang it in. Bharti’s bottomline will be very keenly watched as more players enter the scenario with new pricing paradigms. Already the public sector player, Bharat Sanchar Nigam Limited, has taken up Bharti’s challenge and slashed its own prices after the latter cut mobile-to-mobile STD rates by a whopping 50 per cent. BSNL has followed up its move by slashing rates on long distance leased lines as well. Such challenges will crop up more regularly for Bharti now that the price war has well and truly begun.
For the IPO market, the pricing at Rs 45 per share is certainly a critical factor which holds the key to the response the offering gets in the market. The size is hefty: at a minimum of Rs 834 crore, the IPO easily qualifies as a major capital market event that will be analysed thoroughly over the near term. But whether the retail investor will be pepped up by this offering is to be seen, which also explains why it is wholly book-built. In sum, Bharti has done the right things so far. But the IPO and after will be its final test. The jury’s still out on that one.