Subscribe to Bharti Infratel IPO, says SPA Research
SPA Research has come out with its report on Bharti Infratel IPO. The research firm has recommended investors to subscribe to the issue. The company recorded revenues of INR 94.5bn with Net profits of INR 7.5bn in FY12.
December 07, 2012 / 16:29 IST
SPA Research has come out with its report on Bharti Infratel IPO. The research firm has recommended investors to subscribe to the issue. The company recorded revenues of INR 94.5bn with Net profits of INR 7.5bn in FY12.
Bharti Infratel is one of the pioneer tower infrastructure companies with a Pan-India presence (all 22 circles). Bharti Infratel through its 42% stake in Indus Towers has economic interest in 80,656 towers (34,220 – BIL and 46,436 – Indus). It builds, operates and owns towers which are then rented to Telecom operators across the country. The company recorded revenues of INR 94.5bn with Net profits of INR 7.5bn in FY12.Also Read: Subscribe to CARE IPO, says MicrosecInvestment RationaleLeader’s quadrant: The Company caters to Bharti, Vodafone and Idea which together account for 68% of pan - India network load. This reflects stable annuity business with huge growth potential for the company from these top 3 players.Rural Push: The Telecom tower infrastructure space is in a growth phase with rural penetration still at a paltry 38.3%; thus presenting a huge opportunity to expand network base further.First Mover Advantage: Increasing urban penetration with a limited space to install towers helped by govt. policy for multi-tenancy augurs well for incumbent players’ margins.Huge barriers to entry: Large number of approvals for setting up towers means high entry barriers for newer players.Technology led growth: New technologies such as 3G and 4G, made available at high frequency (lower wavelength) by the government, require wider tower base and hence new installations.Efficiency Improvement: With data usage growing through higher Smartphone sales, tower base needs to be expanded to improve network efficiency.Risk FactorOperator Consolidation: Lesser number of operators would be an impediment to the tower growth business.Shrinking Call Rates: In an ever decreasing call rate scenario along with MoU the rental rates could suffer and hence, the margins of tower operators would take a hit.Outlook and Recommendation: We expect these scenarios to play in favor of the company going forward which would improve its Margins from 30% to 80% (int’l peers). Taking this into consideration we consider the current per tower valuation to go up from $100,000 to $400,000-$600,000 which its int’l peers are getting given the superior capital structure. Thus we recommend SUBSCRIBE to the Bharti Infratel issue.Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.To read the full report click on the attachment 
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