GTPL Hathway Ltd (GTPLH) is a leading regional MSO in India, offering cable television and broadband services. It was the number 1 MSO in Gujarat with a market share of 67% of cable television subscribers in 2015, accounting for approximately 3.7 million of 5.6 million cable television households in Gujarat and number 2 MSO in Kolkata and Howrah in West Bengal with a market share of 24% of cable television subscribers in this market in 2015, accounting for approximately 0.7 million of 3.0 million cable television households in Kolkata and Howrah. Gujarat is an important market for broadcasters and advertisers as it contributed to more than a 5% viewership share on an all-India basis and more than 8% of the Hindi speaking market in India in 2015. GTPLH accounted for a 14% share of the total cable carriage and placement fee market in India in Fiscal 2016.
As of January 31, 2017, company’s digital cable television services reached 189 towns across India, including towns in Gujarat, West Bengal, Maharashtra, Bihar, Assam, Jharkhand, Madhya Pradesh, Telangana, Rajasthan and Andhra Pradesh. As of January 31, 2017, GTPLH seeded approximately 6.55 million STBs and had approximately 5.69 million active digital cable subscribers. As of August 31, 2016, it received requisitions from LCOs for approximately 2.02 million STBs. Between September 1, 2016 and January 31, 2017, the company has seeded 0.46 million STBs. As of January 31, 2017, GTPLH had 228,217 broadband subscribers and as on the said date the company provided broadband services primarily in the state of Gujarat and had established a home pass of approximately 1.05 million households. GTPLH provides cable television signals to subscribers either directly or through affiliated LCOs with whom the company enters into business arrangements through Interconnection Agreements, or partner with them through joint ventures or “Right to Use” Agreements to increase the subscriber base.
As of January 31, 2017, the company offered up to 285 pan-India standard definition channels, 158 regionally-transmitted standard definition channels, 32 pan-India high definition channels and 39 regionally-transmitted high definition channels on its digital cable platform. It also owns and operates 27 channels offering localized content developed for the states in which it broadcasts, including a range of religious and cultural content, film, music and educational channels. GTPLH also has the right to place the “Gujarat News” channel on its network, which is produced by the Group Company, Gujarat Television Private Limited. With its own produce contents, the company also offers third party contents and thus offers mix of contents. Company’s digital services platform is supported by owned intercity and intra-city optical fiber cable network, which as of January 31, 2017, spanned approximately 5,406 kilometers (on a consolidated basis), and the fiber network leased to the Company, which spanned approximately 3,615 kilometers (on a standalone basis).
To part finance its pre-payment/repayment of certain borrowings and meet general corpus fund needs, the company is coming out with a maiden IPO with a primary offer of Rs. 240 crore (approx 14117647 shares at the upper price band) and offer for sale of 14400000 equity share of Rs. 10 each via book building route with a price band of Rs. 167-170. Through this IPO company hopes to mobilize Rs. 480.48-Rs. 484.80 crore (based on lower and upper price bands). Minimum application is to be made for 88 shares and in multiples thereon, thereafter. Issue opens for subscription on 21.06.17 and will close on 23.06.17. Post issue shares will be listed on BSE and NSE. BRLMs to this issue are JM Financial Institutional Securities Ltd, BNP Paribas, Motilal Oswal Investment Advisors Ltd and Yes Securities (India) Ltd. Link Intime India Pvt Ltd is the registrar to the issue. After initial equity issue at par in 2006-2007 the company raised further equity in a price range of Rs. 1250 to Rs. 2400 during 2009 – 2016 and then issued bonus shares in the ratio of 40 shares for every 1 share held in March 2016. Post issue, its current paid up equity capital of Rs. 98.35 crore will stand enhanced to Rs. 112.47 crore.
On performance front, the company has (on a consolidated basis) posted turnover/net profits- (loss) of Rs. 528.81 cr. / (Rs. – 8.46 cr.) (FY14), Rs. 627.20 cr. / Rs. 15.49 cr. (FY15) and Rs. 746.20 cr. / Rs. 4.60 cr. (FY16). For the first nine months of the current fiscal, it has posted net profit of Rs. 16.30 cr. on a turnover of Rs. 663.46 crore. Thus it has inconsistency in top and bottom lines. Sudden jump in bottom line for first nine month is surprising. Management clarified for that higher provisions of depreciations for the imports of Set Top Boxes in FY14 and FY16 kept check on bottom lines; and billings for the same in the following years boosted the bottom lines. For last three fiscals (on consolidated basis) its average RoNW 10.37%. If we annualize the latest earnings and attribute on fully diluted equity post issue, then asking price is at a P/E of 88 and at a P/BV of 3.29. Most of its peers including the co-promoters are faring badly and making losses. Issue pricing looks very aggressive compared to its peer who are not doing well. Asking price probably discounts next two years likely earnings leaving nothing on table for new investors in immediate future. While three IPOs that have entered the primary market recently disclosed their earnings till March 2017, GTPLH has disclosed earnings only up to December 2016 leaving suspension on FY 17 earnings.
On merchant banker’s front, 4 BRLMs associated with this offer have handled 16 issues in past three years out of which 4 issues closed below the offer price on listing date.
Conclusion: Issue is highly priced. Only risk savvy cash surplus investors may consider moderate investment for long term.
DISCLAIMER: No financial information whatsoever published anywhere here should be construed as an offer to buy or sell securities, or as advice to do so in any way whatsoever. All matter published here is purely for educational and information purposes only and under no circumstances should be used for making investment decisions. Readers must consult a qualified financial advisor prior to making any actual investment decisions, based on information published here. Any reader taking decisions based on any information published here does so entirely at own risk. Above information is based on RHP and other documents available as of date coupled with market perception. Author has no plans to invest in this offer.
(SEBI registered Research Analyst-Mumbai).
About Dilip Davda
Dilip Davda (SEBI registered Research Analyst-Mumbai), a freelance journalist for more than 25 years, is a stock market analyst and news article writer. Since 1985, he has contributed to print media, electronic media and often appears on TV channels as visiting stock analyst. His articles are regularly publishes in Smart Investment (English and Gujarati weekly published from Ahmedabad), Free Press Journal and many other news papers & magazines. He is also a visiting stock analyst on DD News TV Channel.
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