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Ortel Communications Ltd IPO Review (Avoid)

Review By Dilip Davda on Feb 24, 2015

Ortel Communications is a flagship company of Panda group and is a regional cable television and high speed broadband services provider focused in the Indian states of Odisha, Chhattisgarh, Andhra Pradesh and West Bengal. It has built a two-way communication network for 'Triple Play' services (video, data and voice capabilities) with control over the 'last mile' and has pioneered the primary point cable business model in India by offering digital and analog cable television, broadband and VAS services in Orissa, Chhattisgarh, West Bengal and Andhra Pradesh. The company holds a dominant position in Orissa, with a fast-emerging presence in our three other markets, covering an addressable market of approximately five million under the brand names, 'Ortel Home Cable', 'Ortel Digital' and 'Ortel Broadband'. Now to expand its network for providing Video, data and meeting the capital expenditure of digital cable services and broadband services and raising general corpus fund, the company is coming out with book building process issue of 1,20,00,000 equity share of Rs. 10 each with a price band of Rs. 181-200 and targeting to raise between Rs. 217.20-240 crore. The issue consists of 60,00,000 fresh equity issue and 60,00,000 offer for sale by existing stakeholders. 75% shares are reserved for QIBs, 15% for HNIs and just 10% to retail investors. Minimum application is to be made for 75 shares and in multiples thereon, thereafter. Issue is lead managed by Kotak Mahindra Capital Co. Ltd and Karvy Computershare Pvt Ltd is the registrar to the issue. Post allotment the shares will be listed on BSE and NSE.

 

Issue opens on 03.03.15 and will close on 05.03.15. On 2nd March, it is inviting bids from Anchor Investors. Post issue, equity share capital of the company will stand at Rs. 30.37 crore. The issue will dilute 39.25% equity on the basis of post issue paid up capital. Between October 1999 and July 2014 it issues equity shares at a premium ranging from Rs. 5 to Rs. 135 per share to reach paid up capital of Rs. 24.37 crore. For last three fiscals it has posted an average negative EPS of Rs. 7.63 and thus it has negative P/E and NAV of Rs. 8.31 as on 30.09.14. Thanks to premium collected on preferential issue that has helped more erosion in NAV.  

 

On performance front, the company has incurred losses till last fiscal. For the first half of fiscal 2014-15 it has clocked in turnover of Rs. 71.93 crore with a net profit of just Rs. 0.66 crore. It has carried forward losses. Based on this, if we annualized the earnings on the post issue expanded equity of Rs. 30.37 crore, then it is at a P/E of 400 plus and thus is aggressively priced. Although management claimed that in India no exact peer is available for comparison as this is the only company with 90% plus 'last mile' distribution. But then the pricing is discounting its next two years earnings and thus has nothing on table for new investors. On merchant banker's front, as per Chittorgarh.com data, it has 49 mandates in the past out of which 14 issues failed to give listing gains. Thus the ratio of success is around 60%.

 

As SEBI has done away with, this offer has not opted for any grading, has neither any safety net nor any discount for retail investors.


Conclusion / Investment Strategy

At the asking price this negative P/E IPO is a risky bet and hence no harm giving it a miss.

(Disclaimer: Author has no plans to invest in this IPO)

Reviewer recommends Avoid to the issue.

Review By Dilip Davda on Feb 24, 2015

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 information published here. Any reader taking decisions based on any information published here does so entirely at its 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.

(SEBI registered Research Analyst-Mumbai).


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.

Email: dilip_davda@rediffmail.com

Ortel Communications IPO FAQs

  1. 1. Why Ortel Communications IPO?

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

  2. 2. How is Ortel Communications IPO?

    Read the Ortel Communications IPO recommendations by the leading analyst and leading stock brokers.

    • Dilip Davda - Avoid
    • Emkay Global - Apply
    • Hem Securities - Avoid
    • ICICI Direct - Avoid
    • VS Fernando - Apply
  3. 3. Ortel Communications IPO what should investors do?

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

  4. 4. Is Ortel Communications IPO good?

    Our recommendation for Ortel Communications IPO is to avoid.

  5. 5. Is Ortel Communications IPO worth Investing?

    As per the analysis by our lead analyst Mr. Dilip Davda, we suggest you to avoid the Ortel Communications IPO.

  6. 6. When will Ortel Communications IPO allotment status?

    The Ortel Communications IPO allotment status will be available on or around [.]. The allotted shares will be credited in demat account by [.]. Visit Ortel Communications IPO allotment status to check.

  7. 7. When will Ortel Communications IPO list?

    The Ortel Communications IPO will list on Thursday, March 19, 2015, at BSE, NSE.