5th November 2004, 11:55 AM
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Re: Hutch Ipo
Hutch IPO
Quote:
Hong Kong-based Hutchison Telecommunications International Ltd (HTIL) is planning a public float of up to 25% of the equity of its proposed Indian holding company. Hutch may also raise the size beyond 25% if it is able to only partially consolidate its truncated holdings in its telecom operations in India. The Indian IPO is expected to hit the market between December 31, 2004 and June 30, 2005.
HTIL’s holding in six Indian mobile operations through minority stakes is 56%. Analysts reckon Hutch India’s valuation to be around $1 billion based on Bharti Tele-Ventures’ market capitalisation, the only listed telecom company.
“Considering Bharti’s EV to EBIT multiples of 17 times FY 2005 earnings, if we give the similar multiples to Hutch India, its market cap comes to around $1 billion,” points out Ganesh Duvvuri, analyst at Motilal Oswal Securities.
“However, for Hutch India, we need to take a discount of 30% to Bharti due to its lower profitability and also because Bharti has a pan-Indian footprint.”
Mr Duvvuri adds that the telecom business is capex-intensive. “Hutch India’s capex plan for the year 2004 is HK$3.3 billion, out of which HK$1.1 billion has already been invested,” he says.
HTIL — which has telecom holdings in Hong Kong, India and Israel — has indicated that the minimum Indian public float will be 10%, as required by the Securities and Exchange Board of India (Sebi). Reports indicate that post-IPO, HTIL’s holding in Indian operations would be diluted to 50.9% from the current 56%.
The tepid response to HTIL’s HK$1.1 billion IPO is being attributed to the risk of Indian operations being spun off into a separate company. The offer document states that after the Indian IPO, “Hutch India would cease to be consolidated in the HTIL group’s financial accounts and would instead be classified as an associated company of the HTIL Group.”
A lacklustre investor response is said to have resulted in the trimming of HTIL’s New York and Hong Kong offering to $965 million-$1.1 billion from the earlier size of around $1.5 billion.
Huch India is the major revenue driver for HTIL. Hutch India’s revenue share among HTIL’s five business segments has been steadily rising — it has jumped to 46.5% in 2004 (six months ended June) from 34.8% in 2001 and 43% in 2003.
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