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Bharti Hexacom sparkles on market debut; stock gain 43% at Rs 814

Bharti Hexacom, a subsidiary of Bharti Airtel, provides fixed-line telephone and broadband services primarily in two circles-Rajasthan and North East

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BS Reporter Mumbai

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Shares of telecom service provider Bharti Hexacom surged as much as 54 per cent during their trading debut on Friday. After hitting a high of Rs 880, the stock closed at Rs 814, with a gain of 43 per cent over its issue price of Rs 570. The stellar debut follows a strong response to the company’s Rs 4,275-crore initial public offering (IPO), which was subscribed nearly 30 times. The IPO was the largest since Mankind Pharma’s Rs 4,326-crore share sale in April last year.

Bharti Hexacom, a subsidiary of Bharti Airtel, provides fixed-line telephone and broadband services primarily in two circles—Rajasthan and North East (NE)—and accounts for about 7 per cent of total customers.

JM Financial initiated coverage of the stock with a 'buy' rating and a price target of Rs 790, citing healthy estimated growth in average revenue per user (ARPU) and operating profit (Ebitda).

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“We expect Bharti Hexacom’s ARPU to grow at 10 per cent CAGR, consisting of: a) 6-7 per cent ARPU CAGR due to regular tariff hikes; and b) 3-4 per cent ARPU CAGR due to Bharti Airtel’s premiumisation strategy. Bharti Hexacom’s FY24-26/FY24-30 Ebitda CAGR could be higher at about 17 per cent/15 per cent due to presence in high growth potential markets as Rajasthan/NE circle has: a) relatively lower teledensity; and b) relatively lower penetration of high ARPU post-paid and data subs. We initiate coverage on Bharti Hexacom with a BUY (target price of Rs 790) based on 10 times FY26 EV/Ebitda (in line with valuation of Bharti Airtel’s India wireless business),” said the brokerage in a note.

Investment bankers said the strong debut will help improve sentiment towards new share sales, which was dampened by a spate of poor listings in March amid a selloff in small-cap stocks.

Retail investors had given Bharti Hexacom’s IPO a miss, with their allocated quota remaining undersubscribed.

Bharti Airtel holds a 70 per cent stake in the company, while the Government of India now holds 15 per cent through Telecommunications Consultants India (TCIL). In the IPO, TCIL sold a 15 per cent stake.

At the last close, Bharti Hexacom’s market cap stood at Rs 40,700 crore.

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First Published: Apr 12 2024 | 4:41 PM IST

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