Udayan cautious on Bharti Infratel, says Rs 210 price okay

Managing Editor of CNBC-TV18, Udayan Mukherjee says the price of Rs 210 (a lower end of price band of Rs 210-240), which broadly coincides with 10 times EV/EBITDA, seems like a reasonable multiple to pay. Also, it works out to about Rs 50 lakh a tower, which also seems like a reasonable kind of an asset value to impute, he quickly adds.

Managing Editor of CNBC-TV18, Udayan Mukherjee on Bharti Infratel

There is a divided opinion on Bharti Infratel. It helps that anchors are put in at Rs 230 but that is not conclusive, that is the price at which the issue will get done. I cannot say that I have some great knowledge or insight into this business because it is a new business. I have read some of the reports, which are (both) positive and negative on Bharti Infratel. It seems reasonable to me as we were discussing a few days back that at that price of Rs 210, which broadly coincides with 10 times EV/EBITDA, seems like a reasonable multiple to pay. Also, it works out to about Rs 50 lakh a tower, which also seems like a reasonable kind of an asset value to impute. That is a price at which the issue should not face too many hiccups coming from the pedigreed house that it is coming through.

For me, the good scenario is retail gets allotment at Rs 200 and that seems like a comfort price. The moment you start getting 20 percent higher than that towards that Rs 240 zone, valuation start to look a little stretched and maybe there will not be too much juice above Rs 240 not post listing, not eventually because this is not a very high growth business.

The tenancy ratio for Bharti Infratel may not be too low but it is not growing at a very fast clip. So you want to buy stories now that will give you visible growth without regulatory risks. On both those counts, Bharti Infratel probably is not the strongest story. At Rs 200, you have some level of safety. You could probably buy it and hold for some period of time and hope to make a bit of money. But this is not the kind of stock, which probably will list at Rs 280 and will give you phenomenal listing gains. The closer to the lower end of the band that they (Bharti management) do the issue is obviously better for investors. But for retail, they should be pinning their hopes on an allotment at Rs 200-205. That should be their comfort zone not too much higher.

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