Hughes Tele.com book oversubscribed 1.3 times

It was a successful closing for the book-built portion of the Rs 7.5 billion Hughes Tele.com issue. The largest telecom issue in the Indian market has seen a near full demand of 49 per cent allotment towards foreign institutional investors (FIIs). A small percentage would be kept open by the merchant banker to allow for strong aftermarket support, say sources.

The retail community, including high net worth individuals and non-resident Indians, have brought in over Rs 1 billion towards the issue. The overall demand for the offering was over Rs 10 billion, with strong support coming from domestic and foreign institutions. All the large domestic institutions and insurance companies have bid for a substantial portion of shares in the issue.

Post-IPO, Hughes Tele.com will have 1.55 billion shares. At Rs 12 per share, this translates into a market capitalisation of Rs 18.64 billion and a market value per subscriber of Rs 0.69 million - 320 per cent higher than Bharti BT's Rs 0.17 million market value per subscriber. Hughes Tele.com currently has a subscriber base of 27,000, while Bharti BT has a subscriber base of 558,000.

This would mean that the market has valued the Hughes Tele issue at a much higher value than most other telecom players.

While officials at Kotak Mahindra Capital Company - the merchant bankers to the issue - declined to offer details of the investor bids, insiders revealed that within the FII community, demand has come from large funds (who would operate as long-term value players) and some 'flipper' funds (who would immediately flip/sell the stock on allotment).

The second category of investors would also help the market and add momentum to the stock, say sources. "The issue has revealed two things - that branding is crucial and investors view the company as the strongest long-term player in the Maharashtra circle to take on the likes of MTNL," Shanti Ekambaram, executive director, Kotak Mahindra Capital Company told NetScribes.

Hughes Tele.com has fixed the price of its Rs 7.5-billion public issue at Rs 12. This also happens to be the base floor price for the company's book-built issue. The book-built issue, which closed on Tuesday, was oversubscribed 1.3 times. The book-built portion was for 90 per cent or Rs 6.75 billion worth of shares.

The fixed price issue will now apply for the remaining 10 per cent. This will also be the price at which Hughes Tele.com will bring in Rs 1.37 billion as equity into the company.

IDBI has bid for Rs 1.25 billion worth of shares, ICICI Rs 1.75 billion, UTI Rs 1-1.5 billion and LIC Rs 400-500 million. FIIs, led by AIG and Asian Equity Infrastructure Fund, have put in bids worth Rs 3.49 billion.

Sixty per cent of the book-built portion has been allotted to the financial institutions, while the balance has been allotted to the 26,000 retail investors who have bid for the issue.

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