Review of Reliance Infratel IPO

By Vipin Agnihotri

Reliance Infratel is all set to come out with issue of nearly 9 crore shares, the second IPO from the ADAG Group and as The India Street always want to give you exclusive news. Here, we are with the review of Reliance Infratel IPO. First and foremost, the company is basically into passive infrastructure in the telecom space. The issue size is around 8.9 crore shares which by the way constitutes only 10% of the post issued equity.

The best part about this IPO is that it has part payment option for retailers. Point to be noted here is that Reliance Power also offered same sops to the retail investors who had applied for it’s recently concluded Rs 11,560 crore IPO, the country’s biggest primary market issue so far. It had offered a flat discount of Rs 20 a share to them, nearly 4% of the issue price of Rs 450 and a part-payment facility wherein an investor could apply for the issue with a 25% payment.

Initial signs are that the company will have around 36,849 towers by the end of March 2008. At this moment of time, it owns nearly 23400 towers. I have information that these towers at present are operating at nearly 1/3^rd occupancy because the anchored tenant in these towers is Reliance Communications and its subsidiaries.

Another important thing that one must take into consideration is the fact that the company has a firm roll out order of 16,000 towers for which it’s going to come to the market and these have to be delivered by March 2009 at an estimated cost of Rs 4,623 crore. Therefore, I am pretty much sure that this IPO will be in the range of Rs 5,000 to Rs 5,500 crore which gives the valuation of USD 12.5 to USD 13.7 billion. In terms of financials, it has Rs 900 crore for the 9-month period of FY08 and Rs 150 crore in bottom line, therefore by the end of FY 08, revenues of Rs 12,000 crore and nearly Rs 200 crore worth of profit can be expected for the company.

About Reliance Infratel:

Reliance Infratel is part of the Reliance Anil Dhirubhai Ambani Group. Its business is to build, own and operate telecommunication towers and related assets at designated sites and to provide these passive telecommunication infrastructure assets on a shared basis to wireless service providers and other communications service providers under long-term contracts.

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