Mumbai: Bharat Business Channel Ltd, the satellite broadcasting arm of Videocon group, is likely to raise Rs.700 crore through an initial share sale in mid-February at Rs.60-70 per share, said a person familiar with the development. The DTH arm filed its draft offer in December.
“It should take about 30 days for the Securities and Exchange Board of India (Sebi) to complete the approval process. The company and book runners are paying specific attention to pricing of the issue to get a good response to the IPO,” said the person cited above.
The company has also arranged a loan of Rs.1,200 crore for business expansion and retirement of existing debt, the same person said.
Videocon chairman Venugopal Dhoot and Saurabh Dhoot, a director at Videocon group, declined to comment on the matter. A senior company official, on condition of anonymity, said Videocon “is very keen on doing the IPO in February as the market is good”. The BSE benchmark Sensex ended trading at a two-year high of 20,039 points on Friday.
“Pricing is very critical right now as the market sentiment is improving. If the offer price for Bharat Business Channel is fixed around Rs.70, the issue should find success. The Bharti Infratel issue did not see much success due to inappropriate pricing but the Care (Ltd) issue got a great response,” said an investment banker with a domestic firm who spoke on condition of anonymity.
Sebi chairman U.K. Sinha has been emphasising on discipline in IPO pricing for investor protection while cautioning investment bankers against overpricing public offers as a higher issue price could lead to poor demand and fall in the stock price post listing.
Dish TV and Tata Sky lead the direct-to-home or DTH market, followed by Videocon and Airtel Digital TV, according to media analysts.
Videocon’s DTH arm will be the second standalone DTH firm to be listed after Dish TV Ltd.
“The investor appetite is high and if the management of the company is good and backed by appropriate pricing of the issue, it is a win-win situation for the company and the investors,” said market analyst Ambareesh Baliga.
The government has set a deadline of 31 December 2014 for the completion of digitization across India.
“With digitization happening, clearly the cash flows and revenues will go up. The DTH players are very well positioned to handle the growth, with call centres and other infrastructure in place,” said Devendra Parulekar, a partner at Ernst & Young Pvt. Ltd.
Parulekar added that though Videocon was the last to get into the DTH business, “it has heavily invested in this vertical in the past two years”.
According to a joint report in 2012 by industry body Federation of Indian Chambers of Commerce and Industry and KPMG India Pvt. Ltd, India is the third-largest TV market in the world, behind the US and China, with 146 million television households.
The number of active DTH subscribers in India will touch 42 million, making it the largest DTH market in the world by 2012, according to Media Partners Asia’s annual research report Asia Pacific Pay-TV and Broadband Markets 2011. The report estimates the DTH subscriber base in India will grow to 83 million by 2020.
Rural areas and smaller cities contribute nearly 70% of Videocon’s revenue. Jehil Thakkar, a partner at KPMG, said Videocon could gain an advantage over its competitors in smaller cities as the competition is relatively less there as compared to the metros.