Hathway IPO fully subscribed; should you invest?

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Hathway IPO fully subscribed; should you invest?

The response to the initial public offering (IPO) of Hathway Cable and Datacom, a cable television services provider, has been lukewarm. The issue has been subscribed just 0.91 times so far, as per data available on the NSE website. The 277.5 lakh equity shares IPO closes today.

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The response to the initial public offering (IPO) of Hathway Cable and Datacom, a cable television services provider, has been lukewarm. The issue has been subscribed just 1.29 times so far, as per data available on the NSE website. The 277.5 lakh equity shares IPO closes today.

The maximum subscription to the issue was seen at Rs 240, at lower end of price band of Rs 240-265 per share. Even the anchor investors, prior to the issue opening subscribed for 4.99 million shares at Rs 240/share, at lower price band.

Experts also have concerns on the issue and industry in which this company works.

Investment Advisor, SP Tulsian recommended investors to avoid the issue. "The company has been consistently incurring losses on the net level from FY05 onwards till 6 months ending 30-09-09, and the total net losses incurred in these 5 and half years have been at Rs 304 crore. Though the topline of the company has been showing an improvement having moved to Rs 673 crore in FY09, from Rs 209 crore in FY05, but what is the point, if net losses are also on an increase with rise in topline. Net loss of Rs 36 crore in FY05 has moved to Rs 63 crore in FY09 and to Rs 42 crore in 6 months ending 30-09-09. This means, the business of the company is like two railway tracks, which looks meeting at a distance but never meet."

Tulsian also said, "Hathway is mainly giving exit to its PE investors and alongwith this, raising about Rs 500 crore, as its existing debt equity ratio is already over 1:1, as of date. Post IPO, even at the lower band, its market cap will be about Rs 3,500 crore and EV will be about Rs 4,000 crore, against market cap of Rs 2,500 crore of Den Networks. So by any standards the issue is not worth considering, as comparable peer with better fundamental is available at Rs.186. Just give a pass to the issue as it is highly expensive and proposed IPO proceeds will go in blackhole."

While talking to CNBC-TV18, Satish Betadpur, MD at IIR Group, PLC said the issue looked good for those who hold the stock for five-ten years. "Look at Den Networks and see what it has done; it's basically in the same space. You can get Den at lower than initial public offering (IPO) price and that will be cheaper than where the current Hathway is being priced at."

He said, "This whole consolidation story is a longer-term bet, five-ten years story because first cash has to be spent to consolidate and then you will generate a lot of free cash flow. So let's leave it to the big boys who have that holding timeframe for these types of stocks."

Next page: Satish Betadpur, MD, IIR Group, PLC and Rajesh Jhawar of Antique Stock Broking discuss the pros and cons of the issue.