Mumbai: Regional telco Spice Communications Ltd received bids for only 0.19% of the shares on offer on the first day of its initial public offering (IPO).
The Rs520-crore share sale of the company, which has got a combined subscriber base of three million in the Punjab and Karnataka telecom circles, is open till Wednesday. According to the Bombay Stock Exchange (BSE) website on Monday, the company got bids for 215,595 shares out of over 113.1 million shares on offer.
Spice has set a price band of Rs41-46 per share for its IPO to raise between Rs470 and Rs520 crore. It plans to use the IPO money to part-repay its long-term debt, and fund capital expenditure and licence fee payments required for the company’s entry into the national long distance (NLD) and international long distance (ILD) telephony businesses.
“It is the first day and so there is nothing unusual about it. Foreign investors would need to move their money into India so that they can write the margin-money cheques,” said S. Subramanian, head, investment banking arm of Enam Financial Consultants Pvt. Ltd, the book-running lead manager for IPO.
Mumbai-based brokerage Angel Broking Ltd has recommended that investors ‘avoid’ subscribing the issue in a research note issued on Monday.
“On a valuation basis, Spice will trade at a premium to both the market leaders in the country, Bharti Airtel and Reliance Communications, in terms of EV/Ebitda (enterprise value to earnings before interest taxes, depreciation and amortization) multiple. This, we believe, is not justified, given its significantly lower scale vis-à-vis its peers, lower Ebitda margins and absence of a strong track record of execution,” said Harit Shah, a telecom analyst with Angel Broking in the note.
“The only likely trigger for the stock is a possible takeover by a competitor, which could lead to a brighter future in terms of growth prospects,” added Shah in his note.
Spice is counting on business from Telekom Malaysia Bhd, Southeast Asia’s second largest telephone company and a 49% stakeholder in Spice Communications for its ILD business.
“Upon implementation of ILD license, we expect to benefit through high-volume commitments from Telekom Malaysia, which has investments and operations in Asia-Pacific region—Indonesia, Sri Lanka and Thailand,” Umang Das, managing director, Spice Communications, told PTI.