After mopping up nearly `4,300 crore from the proceeds of Bharti Hexacom’s public listing in April by selling a 15% stake, state-owned Telecom Consultants of India (TCIL) is now looking at selling the balance 15%, after telecom tariff hikes, officials said.
The market is expecting a 20-25% tariff hike by telecom service providers after the elections, which may result in an increase in the share price of Bharti Hexacom.
Officials said the balance stake sale will be held in tranches. It could be 10% in one go or 5% each in three tranches or something like that. The plan is to rake in the maximum possible gains for the government, they added.
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One of the reasons for TCIL to exit Bharti Hexacom is because the latter competes directly with BSNL. The government, thus, through TCIL does not want to continue maintaining its shareholding in Hexacom, in which Bharti Airtel holds a majority 70% stake.
In the past, the government has made many attempts to exit Bharti Hexacom, but they were not giving the right valuations, as per officials.
At the current share price of `1,011 apiece of Bharti Hexacom, TCIL’s 75 million shares could fetch over `7,500 crore. However, there is also a six-month lock-in period, which the company will have to follow before selling any stake.
In total, TCIL may mop up nearly `12,000 crore at the current market price, much higher than the government’s target of `9,500 crore, officials said. This means that every `100 increase in share price of Bharti Hexacom will increase the value of stake for TCIL by `750 crore.
The government gets proceeds from the stake sale in the form of special dividend after deduction of certain expenses and taxes. After the 15% stake sale in the IPO by TCIL, the government got `3,443 crore as special dividend from TCIL.
TCIL is an engineering and consultancy company and was set up in 1978 for providing Indian telecom expertise in all fields of telecom and information technology. Its core competence is in the fields of switching, transmission systems, cellular services, rural telecommunication, optical fibre based backbone transmission systems, information technology and networking solutions.
The government, in 1995, through TCIL formed a joint venture with Mobile Telecommunications Company, Kuwait and Shyam Telecom Limited to set up Hexacom India for cellular mobile services in Rajasthan and the North East region. In 2004, the company’s name was changed to Bharti Hexacom when Airtel acquired a majority in the company.
The government originally held a 30% stake in Bharti Hexacom.
Bharti Hexacom offers consumer mobile services, fixed-line telephone and broadband services to customers in the Rajasthan and the North East telecommunication circles in India, which comprises the states of Arunachal Pradesh, Manipur, Meghalaya, Mizoram, Nagaland and Tripura. The company sells its services under the brand ‘Airtel’.
In the January-March quarter, the company’s revenue from operations rose 3.7% quarter-on-quarter (QoQ) and 8% year-on-year (YoY) to `1,868 crore. The company’s net profit rose 5% QoQ and 10% YoY to Rs 223 crore.
“Bharti Hexacom is the best way to invest in improving telecom tariffs in India,” said brokerage house Jefferies.
Over FY24-27, Jefferies expects Bharti Hexacom to deliver 17% compound annual growth rate (CAGR) in revenues, 23% CAGR in Ebitda — baking in a 65% incremental Ebitda margin over FY24-27 and 77% CAGR in profits.
From: financialexpress
Financial News
