Cable TV

Ortel IPO opens amidst buoyant stock market conditions

MUMBAI: The Ortel Communications issue opened on 3 March. At  the price band of Rs 181-200, the cable TV last mile operator (LMO) is offering 9.5 million shares to the public. National Stock Exchange data showed that the issue had been subscribed 0.15 times by end of day one of the offer. The company plans to use the money  raised through the issue to deepen the penetration of its cable TV and broadband offering in the geographical regions it is present i.e. Odisha, Chhattisgarh, Andhra Pradesh and West Bengal ; increasing digitisation of its cable TV subscriber base (currently 20 per cent of its analogue universe has been digitised), upgrading technology for its broadband service; buying out of local cable operators and networks, and leasing fibre infrastructure to corporates.

At the time of writing, the IPO had received a mixed response from the investing community and research analysts. While one group says the price band is too high, another bunch has expressed that the Ortel stock has long legs and could go far. 

Says a bullish observer: “The Ortel IPO offer is at 10 times EBIDTA for FY 2015. That’s pretty fair compared to 17 times EBIDTA for Hathway Cable & Datacom and seven times EBIDTA for DEN Networks,” says a research analyst. “We see the share appreciating after listing.”

However, a bear stated that Hathway was quoting in the Rs 60-65 range, while DEN was in the Rs 120 band. “The Ortel price is too high when you compare it to what these stocks have notched up,” she said. “We expect to pick up Ortel after listing when we believe the overpricing will get corrected.”

An ICICI Direct IPO review pointed out that Ortel’s low subscriber base of 0.5 million cable TV homes puts it at a competitive disadvantage against national MSOs such as DEN and Hathway which have 12 million subscribers each. 

But another industry expert  points out that Ortel owns most of its subscriber base, aka as the last mile, which means it will reap the digital dividend and the moolah will straightaway accrue to its top line, and bottom line as it digitally connects more of them.

He also points out to the low floating stock of Ortel that is on offer, which is likely to keep the price buoyant.

At the time of writing, a positive sentiment had been ruling on the stock market with the National Stock Exchange Nifty  crossing an important threshold that of the 9,000 barrier which it did during intraday trading only to fall back to 8996 by close.

The anchor investors for the IPO are Axis Mutual Fund (900,000 shares) and ICICI Prudential Life Insurance (1.657 million shares), while Kotak Mahindra Capital is managing the issue.

The next two days (the issue is slated to close on 5 March) will throw clarity on which sentiment will hold its sway on investors during Ortel's offering. 

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