New Delhi: Bharti Infratel, backed by billionaire Sunil Mittal, fell as much as 12.7 per cent in its trading debut after raising about $760 million in India's biggest IPO in two years, weighed down by a cautious outlook for mobile tower operators. The IPO, priced near the lower end of an indicative price range, struggled to find interest from retail investors and was supported mostly by foreign institutional investors. But analysts are betting on a revival in India's initial public offerings on the back of a recent stock market gains.
Bharti Infratel, a unit of top Indian mobile phone carrier Bharti Airtel Ltd and partly owned by KKR & Co Ltd, was trading at Rs 197.20 as of 0434 GMT on the National Stock Exchange. That was down 10.3 per cent from its IPO price of Rs 220 for funds and wealthy investors, who received the majority of the allocation. Bharti Infratel sold shares to retail investors at Rs 210 and to cornerstone investors at Rs 230.
The IPO also gave funds including Singapore state investor Temasek Holdings and the private equity arm of Goldman Sachs Group Inc an opportunity to cash out of some of their early investments. The listing comes amid an IPO revival in India after a tepid first half. Credit Analysis and Research Ltd and PC Jeweller Ltd also made their debut this week after raising around $100 million each.
The biggest initial share sale since Coal India Ltd raised $3.5 billion in 2010 pushed India's IPO volume to $1.28 billion this year, shy of last year's tally of $1.36 billion, according to Thomson Reuters data. But that is well short of the record set in 2007, when Indian corporates raised $8.65 billion through IPOs.
India's IPO volumes are expected to improve further on rising foreign capital inflows. Several high-profile deals including the listing of Bombay Stock Exchange and the potential IPO of Vodafone Group Plc's India unit are likely to hit as earlier as next year, bankers said.
The broader NSE index has surged about 28 per cent this year, and is Asia's third best-performing market, according to Thomson Reuters data. But weighing on the outlook for mobile tower operators, an Indian court this year revoked permits of several wireless carriers while demand growth for third and fourth-generation mobile data services slowed.
Shares of GTL Infrastructure Ltd, the only other mobile tower operator listed in India, have slumped 90 per cent in the last two years, hit by debt repayment worries.
Bharti Infratel priced its IPO at lower valuations to overcome those concerns, attracting more than a dozen cornerstone investors including units of Morgan Stanley and Citigroup Inc. The IPO valued Bharti Infratel at a 35 per cent discount to peers in the United States and Indonesia with an enterprise value over EBITDA metric, or earnings before interest, tax, depreciation and amortisation, said Nomura analysts. But on a price-to-earnings basis, Bharti's valuation implied a 20 per cent premium to global peers, Nomura said.
Bharti Infratel sold about 146 million shares, or more than three quarters of the shares on offer, while four of its private equity investors, including the arms of Temasek Holdings and Goldman Sachs, sold a total of 42 million shares. Bharti Airtel, which owned 86 per cent of the tower operator before the IPO, did not sell any shares in the process. The IPO was mainly supported by foreign institutional investors, with the company receiving bids for less than a fifth of shares on offer for local retail investors.
Bharti Infratel has about 34,000 towers and owns 42 per cent of Indus Towers, the world's largest tower operator. Along with Indus, Bharti Infratel has a 38 per cent share of the Indian telecommunications tower market.
Bank of America Merrill Lynch, Barclays, Deutsche Bank, HSBC, JPMorgan, Standard Chartered, and UBS were the foreign banks underwriting the IPO, while Kotak Mahindra and Enam Securities were the domestic banks handling the share sale.