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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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS Post interest company is cash +ve, says Hathway Zee Turner may take channels off Hathway Cable networks Hathway IPO price does not leave much of upside: Sharekhan See Hathway going through despite high valuations: Udayan Nifty BSE | NSE 31/05/12 Are Mutual Funds betting on Nifty?

Brokerage views:

Sharekhan in its research report says, the issue price does not leave much of an upside.

The report says, "We believe, with the acquisition-led strategy aided by digitisation initiatives in the cable TV services and the brisk pace of subscriber addition in the broadband services, HCDL's top line is likely to grow at a healthy pace and the profitability is expected to improve substantially in the coming years."

"However we believe at 24.1x and 26.3x FY2010E enterprise value (EV)/earnings before interest, depreciation, tax and amortisation (EBIDTA; EBIDTA annualised for M9FY2010) at the lower and the upper end of the price band respectively the issue price factors in the entire expected improvement in the operating matrix and does not leave much of an upside," according to Sharekhan report.

About the issue

The company had received commitment of Rs 119.76 crore from these anchor investors. Anchor investors included Franklin India, DSP Blackrock, Reliance Capital, Copthall Mauritius and Treeline Asia.

The issue consists of a fresh issue of up to 200 lakh equity shares by the company and an offer for sale of 72.10 lakh equity shares by Monet limited and 5.4 lakh equity shares by MSPI Mauritius India limited. The issue will constitute approximately 19.43% of the post-issue share capital of our company.

The promoters' holding will be reduced to 66.55% from 77.37%. The issue will close on February 11.

It is the leading cable television services provider in India as well as one of the leading cable broadband services providers (Source: MPA Report). It offers analog and digital cable television services across 125 cities and towns and high-speed cable broadband services across 18 cities.

The objects of the fresh issue are to fund customer acquisitions; investment in the development of digital capital expenditure, services and set top boxes; investment in the development of broadband infrastructure, capital expenditure and services; repayment of loans; and fund expenditure for general corporate purposes.

For the period of six months ended on September 2009, it has reported net loss of Rs 35.63 crore and total income of Rs 364.92 crore. It has debt of Rs 443.03 crore on its books.

The book running lead managers to the issue are Morgan Stanley India Company Private Limited, UBS Securities India Private Limited and Kotak Mahindra Capital Company Limited. Link Intime India Private Limited is the registrar.