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Hughes Tele IPO to be at premium

Our Bureau

MUMBAI, Aug. 28

HUGHES Tele.com (India) Ltd (HTIL) has decided to launch its Rs. 749.21-crore initial public offering at a premium. HTIL and its book-running lead managers today fixed a floor price of Rs. 12 per share.

The bids for the book-building portion of 90 per cent aggregating Rs. 674.28 crores of the IPO would open on August 29 and close on September 5. The remaining 10 per cent, amounting to Rs. 74.92 crores out of the Rs. 749.21-crore IPO, will be offered to the public at the fixed price offer to be calculated through the book-building process. The public issue will open on September 20 and close on September 25.

HTIL has over 27,000 lines spread over Mumbai, Navi Mumbai and Pune mainly in business, residential and PCO sectors. HTIL is laying about 3.9 lakh lines to be set up in phases by year 2004 at a total project cost of Rs. 3,485 crores, net of internal cash generation.

``HTIL plans to become a leading provider of broadband services in Maharashtra telecom circle which is the highest revenue earning telecom circle in the country,'' the HTIL President and COO, Mr. Prakash Bajpai, said at a press conference here today.

The company is setting up a modern optical fibre cable network which is capable of supporting high bandwidth applications such as internet access, virtual private networks, Web hosting, e-mail and multimedia conferencing.

HTIL intends to finance the project through existing promoters' equity of Rs. 667 crores, additional promoters' equity of Rs. 137 crores in the IPO, Rs. 749.21 crores to be raised through IPO, loans of Rs. 854 crores from institutions and banks, Rs. 1,07 8 crores by way of vendor financing and Rs. 389 crores expected from internal cash flows net of cash losses.

HTIL is promoted by Ispat India group, the US-based Hughes Electronics Corporation and ALLTELL Corporation.

For the two years it has been in business, HTIL has reported net losses of Rs. 270 crores for the year ended March 2000 and Rs. 62 crores in 1999. Based on its auditors Deloitte Haskins & Sells' projections, HTIL has estimated a net loss of Rs. 221 crore s for the year ending March 2001. For the year ended March 2000, the net asset value (NAV) per HTIL share was Rs. 4.30.

Among 74 internal and 8 external risk factors, HTIL has listed that both the promoter groups, Ispat and Hughes, have recorded losses for the year 1999. Commenting on the fixing of floor price at a premium, company officials said that HTIL had strong spon sors in both the Indian and overseas promoters and would have a first-mover advantage. HTIL had potential as it has bagged the most lucrative Maharashtra circle. HTIL has adopted a focussed marketing strategy which is aimed at attracting high-usage busin ess and premium-residential subscribers.