This Telecom Company Arm Gets SEBI Nod For IPO, Eyes Expansion Amidst Mixed Financial Performance

Bharti Hexacom, a subsidiary of industry giant Bharti Airtel, has secured regulatory approval from the Securities and Exchange Board of India (SEBI) to proceed with its Initial Public Offering (IPO) plans. This green signal from SEBI sets the stage for Bharti Hexacom to take a significant step towards becoming a publicly listed entity, marking a pivotal moment in its corporate journey.

The IPO, which has been structured solely as an offer-for-sale (OFS) of 10 crore equity shares by the sole public shareholder Telecommunications Consultants India, received SEBI's nod without any fresh issue component. Essentially, this means that all proceeds generated from the IPO, excluding associated expenses, will be directed to the selling shareholder.

As per the draft red herring prospectus (DRHP) submitted by Bharti Hexacom to the market regulator on January 19, Bharti Airtel, the parent company, currently commands a 70% stake (equivalent to 35 crore equity shares), while the remaining 30% shareholding (15 crore equity shares) is held by non-promoter Telecommunications Consultants India. This delineation of ownership underscores the strategic positioning of Bharti Hexacom within the broader telecom landscape, leveraging the strengths and synergies of its parent company.

The issuance of an observation letter by SEBI on March 11, following a comprehensive review of Bharti Hexacom's IPO draft papers, signifies a crucial milestone. In regulatory parlance, this observation letter implies that the company has been granted the requisite clearance to launch its IPO within the forthcoming one-year period, signalling a proactive approach towards capital market participation.

Despite facing fluctuations in financial performance, Bharti Hexacom has demonstrated resilience and growth potential within its operational framework. In the fiscal year 2022-23, the company recorded a net profit of Rs 549.2 crore, albeit witnessing a decline of 67.2% compared to the previous year. Notably, its profit in FY22 was buoyed by exceptional gains amounting to Rs 1,951.1 crore. Despite this dip in profitability, Bharti Hexacom's revenue from operations witnessed a robust surge, climbing by 21.7% to reach Rs 6,579 crore, underlining its strong market positioning and customer traction.

However, the financial performance in the first half of fiscal year 2023-24 presents a mixed picture. While the net profit experienced a year-on-year decline of 64.6%, dropping to Rs 69.1 crore, the revenue during the same period exhibited a promising growth trajectory, registering an 8% increase to Rs 3,420.2 crore. Factors such as higher tax costs and exceptional losses have influenced the bottom line, highlighting the dynamic nature of the telecom industry and the need for adaptive strategies.

In navigating its IPO journey, Bharti Hexacom has enlisted the support of leading financial institutions as book-running lead managers. SBI Capital Markets, Axis Capital, BOB Capital Markets, ICICI Securities, and IIFL Securities are playing pivotal roles in facilitating the offering, further underscoring investor confidence and market interest in the telecom sector.

The shares of Bharti Airtel were seen trading with gains of nearly 1% at Rs 1,238 per share as of 11:55 am on the National Stock Exchange (NSE). The stock has gained more than 62% in the last one year.

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