GTPL Hathway IPO: Here's what analysts say

Key Highlights: 

• GTPL Hathway IPO available till June 23, 2017
• The company plans to raise Rs 777 crore from its IPO issue
• GTPL raises Rs 145 crore from its anchor investors

GTPL Hathway Limited (GTPL) – a leading regional multi system operator (MSO) -- has launched its initial public offer (IPO) on June 21, 2017 and will be available till June 23, 2017.

The company will be offering 1.40 crore equity shares at a price band ranging between Rs 167 per piece and Rs 170 per piece.

GTPL plans to raise Rs 777 crore from this issue and will utilise the proceeding for repayment of certain borrowings by the company and general corporate purposes.

50% of the issue has been kept for qualified institutional investors, while 15% for non-institutional investors and remaining 35% for retail individual investors.

The company has raised about Rs 145 crore from anchor investors by allotting total of 85.55 lakh shares.

Alpesh Thacker and Siddhartha Khemka, analysts, Centrum Research said, "Cable television and broadband services industry in India is highly competitive and requires constant technology up gradation, which makes the business capital intensive."

The duo added, "At the higher price band of Rs 170, the stock is valued at 10.9x and 88.0x FY17 EV/EBITDA and P/E, respectively (annualized basis post dilution)."

As per analysts at Centrum, GTPL faces risk  from other distribution channels of digital broadcasting like Over The Top (OTT- eg Netflix) and Direct To Home (DTH) - which has led to broadcasting companies reporting losses in the past.

Centrum recommends to "avoid" the GTPL Hathway IPO.

Bhupendra Tiwary and Sneha Agarwal, analysts at ICICI Securities said, "Though the company remains one of the very few profit making MSO, we remain wary of cable industry structure wherein LCOs hold the key for effective monetisation pass through."

They further stated that GTPL to face risk in the broadband business from Jio’s foray into Fiber to the Home (FTTH). The stock is available at a multiple of 7.5x FY17 annualised EV/EBITDA, on the higher band.

Key Highlights: 

Presently, GTPL has 230000 broadband subscribers with monthly ARPU of Rs 472 and average usage of 35 GB per month.

GTPL enjoys strong content cost benefits owing to its leadership position in the Gujarat market with 67% market share.

Operating revenues and EBITDA of GTPL have grown at a 23.1% and 35.3% CAGR (compound annual growth rate) in FY13-16 to Rs 844.6 crore and Rs 264.5 crore, respectively.

About 2/3rd of GTPL’s presence is in Phase III/IV markets, which are yet to see complete monetisation and will aid revenues as monetisation is visible herein.