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ITI Ltd FPO review (May apply)

Review By Dilip Davda on January 22, 2020

•    ITI Ltd. currently has diversified activities.
•    Through FPO it is getting funds for its growth plans.
•    FPO will also help in reducing GoI holding below 75%
•    According to management, H2 is always better than H1.
•    The FPO price band is an investor-friendly gesture by the company.

ITI Ltd. (erstwhile Indian Telephone Industries Ltd.) popularly known as ITI is the first PSU that was established in 1948 after independence. It enjoyed the monopoly for telecommunication instrumentation area till mid-nineties and thereafter witnessed severe setback. However, not it has made a comeback with well-diversified activities in manufacturing and service sector. It is the one point source for the Indian government for its Digital India plan.  It is already a listed company with Government of India's holding of 89.97%.
ITI caters to a wide customer base across various industry segments like telecommunications, defence, information technology, banks, financial institutions and solar energy. It has a diverse suite of products including defence security encryption products, optical and data network products and passive infrastructure products such as gigabit passive optical network ('GPON'), Wi-Fi products, and manage leased line products ('MLLN'), multi-capacity encryption units, electrical products such as smart energy meters, smart cards, solar panels, set-top boxes and mini personal computers and Internet of Things ('IoT') products and other diverse products such as HDPE ducts, 3D printing and sanitary napkin vending

machines. ITI manufactures certain products at its five manufacturing facilities and produces other products in collaboration with its various technology partners. It also purchases traded products that are installed as part of its projects.
In addition, it provides a wide range of services including operation and maintenance of base transceiver stations ('BTS'), data centre hosting solutions, IT and software services like digital wallet solutions, Aadhaar authentication services, optical fiber cable ('OFC') laying services, telecom product testing services, start-up hub services, skill development services and citizen-centric services like the National Population Register ('NPR') and Socio-Economic and Caste Census ('SECC') and annual maintenance contracts ('AMC') for supplied products.
Currently, ITI is engaged in Government of India ('GoI') projects of national importance including ASCON, Bharat Net, Network for Spectrum, Smart Energy Meters, Space Programme, E-Governance Projects etc.  
ITI Ltd. has manufacturing facilities in Bengaluru, Mankapur, Naini, Palakkad and Raebareli and a research and development ('R&D') centre in Bengaluru and skill development centres under PMKVY in Bengaluru and Srinagar. In addition, as of December 31, 2019, it had 8 regional offices in India that is located in Bengaluru, Bhubaneshwar, Chennai, Hyderabad, Kolkata, Lucknow, Mumbai and New Delhi along with 16 area offices across the country. ITI also has a network system unit headquartered in Bengaluru that executes turnkey projects for installation and commissioning of telecommunication networks. As of December 31, 2019, it had 3,520 employees which include over 731 employees with technical and professional qualifications.

To part finance working capital (Rs. 642.48 cr.), repayment of high-cost loans (Rs. 607.29cr.), and general corpus fund needs (approx. Rs. 135 cr.), ITI is coming out with its FPO (Fresh Public Offer) of 181800000 equity share of Rs. 10 each. It has allocated 1800000 shares for proportionate allotment to eligible employees. Out of net 180000000 shares ITI has allocated for QIB quota (75%), HNI quota (15%) and Retail quota (10%). It has fixed a price band of Rs. 71 - Rs. 77 and thus mulls mobilization of Rs. 1308.96 cr. to Rs. 1399.86 cr. based on lower and upper price band. The last traded price (as on 22.01.20 closing) of ITI was Rs. 100 on the exchange.
The issue opens for subscription on 24.01.20 and will close on 31.01.20. Minimum application is to be made for 150 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. Issue constitutes 16.85% of the post issue paid-up capital of the company.
Having issued initial equity at par, ITI issued/converted further equity in the price range of Rs. 49.44 to Rs. 107.80, between January 1992 and August 2018.
Post issue its current paid-up equity capital of Rs. 897.00 cr. will stand enhanced to Rs. 1078.80 cr. GoI (Government of India) holding will come down below 75% post this issue.
Joint BRLM's to this issue are BOB Capital Markets Ltd., Karvy Investor Services Ltd. and PNB Investment Services Ltd., while KFin Technologies Pvt.  Ltd. (erstwhile known as Karvy Fintech Pvt. Ltd.)  is the registrar to the issue.  
With this issue, ITI Ltd. is looking for a market cap of Rs. 8307 cr. (based on upper price band).

For the last three fiscals, ITI has on a consolidated basis posted turnover/net profits (including Government of India Grants) of Rs. 2088.72 cr. / Rs. 266.39 cr. (FY17), Rs. 1811.62 cr. / Rs. 230.56 cr. (FY18) and Rs. 2004.84 cr. / Rs. 92.54 cr. (FY19).
For the first half of FY20, it has earned a loss of Rs. - (54.40) cr. on a turnover of Rs. 603.40 cr. According to management first half is always a lean period for the company's performance. For Q3 of FY20 ITI has posted a net profit of Rs. 168.25 cr. on a turnover of Rs. 827.95. Thus for 3Qs of FY20, it has posted a net profit of approx. 114 cr.

As on 31.12.19, ITI had an order book of Rs. 11051 cr.  In addition to r Order Book, ITI Ltd. is selected as the lowest bidder (L-1) by the Ministry of Defence on the ASCON Phase IV Project. Various plans under these projects are expected to be in the range of Rs. 7700 cr. Thus the company is likely to have a healthy order book of Rs. 20000 cr. approx.
For the last three fiscals, ITI has posted (on a consolidated basis) an average EPS of Rs.2.67 and an average RoNW of NA. Based on its NAV of Rs. - (1.46) as on 30.09.19, the issue is priced at a negative P/BV.
If we annualize FY20 earnings and attribute it on fully diluted equity post issue, then asking price at negative P/E as it has posted a loss for H1 of FY20. Q3 performance is indicating much better Q4 for FY20.
As per offer documents, ITI has no listed peers to compare with.
Three BRLMs associated with the issue have handled 2 public issues in the past three years out of which 1 closed below the issue price on listing date.

Conclusion / Investment Strategy

ITI Ltd. erstwhile known as Indian Telephone Industries Ltd.) has diversified on many fronts. With its new plans, it can be termed as Indian Technology Innovations Ltd. in true sense. It has a healthy order book indicating sufficient workload for the next 4 - 5 years. ITI is gearing to play an important role in "Digital India" plan. Despite the last traded price of Rs. 100 on the exchanges as on 22.01.20 close, it has fixed a price band of Rs. 71-77 and has thus opted for the investor-friendly gesture. Investment may be considered for long term rewards.

Review By Dilip Davda on January 22, 2020

Review Author

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 before making any actual investment decisions, based on the information published here. My reviews do not cover GMP market and operators game plans. Any reader taking decisions based on any information published here does so entirely at their own risk. Investors should bear in mind that any investment in stock markets is subject to unpredictable market-related risks. The above information is based on RHP and other documents available as of date coupled with market perception. The author has no plans to invest in this offer.

About Dilip Davda

Dilip Davda, a freelance journalist

Dilip Davda is veteran journalist associated with stock market since 1978. He is contributing to print and electronic media on stock markets/insurance/finance since 1985.

Dilip Davda is a leading reviewer of public issues and NCDs in the primary stock market in India. The knowledge he gained over 3 decades while working in the stock market and a strong relationship with popular lead managers makes his reviews unique. His detail fundamental and financial analysis of companies coming up with IPO helps investors in the primary stock market. Dilip Davda has a special interest in analyzing the SME companies and writing reviews about their public issues. His reviews are regularly published online and in news papers.

(Dilip Davda -SEBI registered Research Analyst-Mumbai,

Registration no. INH000003127 (Perpetual)

Email id: ).


  1. 1. Why ITI FPO?

    The initial public offer (IPO) of ITI Ltd offers an early investment opportunity in ITI Ltd. A stock market investor can buy ITI FPO shares by applying in IPO before ITI Ltd shares get listed at the stock exchanges. An investor could invest in ITI FPO for short term listing gain or a long term.

  2. 2. How is ITI FPO?

    Read the ITI FPO recommendations by the leading analyst and leading stock brokers.

  3. 3. ITI FPO what should investors do?

    ITI FPO offers an opportunity to buy IPO shares before they get listed at the stock exchanges. Read the ITI FPO Notes, Analysis and Recommendations by leading stock brokerage firms and experts in the above answer.

  4. 4. Is ITI FPO good?

    Our recommendation for ITI FPO is to subscribe for long term.

  5. 5. Is ITI FPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to subscribe for long term to the ITI FPO.

  6. 6. When will ITI FPO allotment status?

    The ITI FPO allotment status will be available on or around January 31, 2020. The allotted shares will be credited in demat account by February 4, 2020. Visit ITI FPO allotment status to check.

  7. 7. When will ITI FPO list?

    The ITI FPO list date is not yet available. The ITI FPO is planned to list on February 5, 2020, at BSE, NSE.


1. IPO wealth creator     Link|January 27, 2020 6:48:54 PM
for the IPO Review, I see the recommendation as OTHER, what does it signify, whether to subscribe or not in such case? please list all the recommendations.