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Bharti Infratel IPO Views - 16th Dec 2015

Telecom | Published on Dec 07th 2012

IT

Bharti Infratel limited (Bharti Infratel) is tower and related infrastructure providing company of Bharti group. It is one of the largest tower infrastructure providers in terms of number of towers own and operated by a company having pan India presence on a consolidated basis. Bharti Infratel has registered a 3.4% and 9.6% CAGR in towers and tenancies, respectively over the last three years. The company posted 15.9% and 21.0% revenue and EBITDA CAGR over FY2010-12. In terms of valuation, the current IPO price band of `210-240 implies a June 2012 annualized EV/EBITDA of 11-13x, EV/tower of `0.5-0.56cr; P/E of 45-53x, and P/BV of 2.7-3.0x, which we believe is at a premium. In addition, low asset turnover and minimal use of leverage in a capital intensive industry have resulted in low RoE for Bharti Infratel over the past three years. Bharti Infratel’s RoE has remained in the range of 4.0-5.2 in the past couple of years. Also, the overcapacity in the industry is expected to limit the demand for rollout of new towers. Further, regulatory changes and the resultant uncertainty pose a risk to telecom players as their network rollout plans could be hampered. Hence, we recommend Avoid to the issue on account of its premium valuations.

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