GTPL Hathway shares close slightly higher on stock market debut
Shares of cable TV service provider GTPL Hathway Ltd opened at the issue price of Rs170 on their first day of trading on Tuesday and fell further to a low of Rs162.25, before recouping to close at Rs171.65, up 0.97%.
GTPL Hathway’s initial public offering (IPO), which was open for subscription during 21-23 June, was subscribed 1.53 times. The company planned to raise Rs240 crore through a fresh issue of shares and a secondary share sale comprising 14.4 million shares by the promoter group. It had raised Rs145.43 crore by allotting shares to anchor investors. Proceeds from the fresh issue will be used for repayment and prepayment of debt, which stands at Rs229 crore.
The last company to go public was Central Depository Services (India) Ltd, which was subscribed 170.16 times and closed 75% higher on its first trading day.
Ahead of the IPO, analysts said the GTPL Hathway issue was expensive compared to peers.
According to Angel Broking, GTPL’s price to book value multiple annualized for the first nine months of FY17 is at 3.1 times, compared to Den Networks at 1.8 times, Hathway Cable and Datacom at 0.7 times, Ortel Communications at 1.4 times and Siti Networks at 4.8 times. “The cable industry is already undergoing a period of weak performance and with disruptive pricing of new entrants, there is a high probability that the performance may weaken further,” it said in a report on 20 June.
GTPL Hathway is market leader in Gujarat, with a market share of 67% of cable TV subscribers in 2015.
“Gujarat is an important market for broadcasters and advertisers with 5% viewership share from the market on an all-India basis and more than 8% of the Hindi-speaking market in India in 2015. Hence, the company accounted for 14% share of the total cable carriage and placement fee market in India in FY16,” ICICI Securities Ltd said in a 16 June report.
The company has 230,000 broadband subscribers with monthly average revenue per user (Arpu) at Rs472 and average usage of 35GB per month. From 2013-14 to 2015-16, its revenue registered a compound annual growth rate (CAGR) of 18% and Ebitda of 22%, largely supported by reduction in cost of raw materials.
“However, adjusted net profit for the company looks patchy on account of high interest cost and depreciation due to capital intensive nature of the business. Return profile for the company is weak,” Centrum Broking said in a 20 June report.
GTPL earns most of its revenues via subscription, activation and placement revenues.
As of fiscal 2016, subscription revenues contribute as much as 40% to overall revenues and have grown at 32% CAGR from 2013-14 to 2015-16.
“Being a regional leader, the company enjoys several content costs advantage with broadcasters. Hence, it operates at a better margin profile against its peers. Going ahead, as the high Arpu generating broadband segment gains momentum, margins are expected to improve further. In addition, monetisation of phases II and III will be further Ebitda accretive,” ICICI Securities added.
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