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Spice Comm IPO an attractive bet: Experts

Saturday, June 23, 2007

Spice Communications, a Noida-based cellular operator, is coming out with an initial public offering, IPO to raise around Rs 523 crore in the upper end of the price band of Rs 41-46 per share. The IPO opens on June 25 and closes on June 27.

Moneycontrol conducted a poll on market experts to check whether to apply for the public issue or not. Experts said apply.

Experts/Company

Poll Result

Experts vi

R S Iyer

(KR Choksey)

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Spice Comm is a very good, fancy issue. The price band of Rs 41-46 is very cheap. It is an investor friendly issue and looks attractive. It can lift the IPO market going forward. Looking at the growth in communication industry, investors can apply for it. One can expect Rs 60 atleast on listing.

Manish Bhatt

(Prabhudas Lilladher)

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Spice Communications is a good issue though it is a loss making company. Looking at the growth in telecom sector, investors can apply for the issue.

SP Tulsian

(Investment Advisor)

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Spice Communications has been passing through a bad financial phase and as on 31/12.06 had debt of Rs 1208 crore. The accumulated losses on 31/12/2006 were placed at Rs 684 crore due to which net worth was negative at Rs 160.52 crore. The company cannot post its bottomline in black due to huge interest and depreciation burden of over Rs.325 crore per annum. Infusion of fresh funds of about Rs 500 crore by proposed issue would help marginally. Hence, fundamentally it may not be a prudent investment. However, it is definitely a take-over target, sooner or later. If that is taken as a benchmark, share of this company gets a valuation close to Rs 60- Rs 62. Expecting that to happen, one can consider investment in the stock from capital appreciation point of view.











A major portion of the issue proceeds would be used towards repayment of debt, payment of license fee for national (NLD) and international long distance (ILD) communication segments and payment to vendors for network equipments.

At least 60% of the net issue to the public shall be allotted on a proportionate basis to qualified institutional buyers (QIBs).

Further, 10% of the net issue shall be available for allocation on a proportionate basis to non-institutional bidders, while 30 per cent of the net issue to the public shall be available for allocation on a proportionate basis to retail bidders.

The equity shares are proposed to be listed on the Bombay Stock Exchange.

The issue will constitute 16.39% of the fully diluted post-issue equity share capital of the company. In March last year, Telekom Malaysia has picked up a 49% stake in Spice Communications Private Ltd for USD 178.85 million (Rs 733.28 crore).

Following the IPO, Telekom Malaysia's stake would come down to 39 per cent.

For the six months ended December 2006, the company had posted a net loss of Rs 41.81 crore on net revenues of Rs 394 crore.

Enam Financial Consultants and UBS Securities Pvt Ltd are book running lead managers to the issue.

Posted by FR at 9:33 PM  

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IMPORTANT DISCLAIMER

Investment in equity shares has its own risks. Sincere efforts have been made to present the right investment perspective.The information contained herein is based on analysis and up on sources that we consider reliable. I, however, do not vouch for the accuracy or the completeness thereof. This material is for personal information and I am not responsible for any loss incurred based upon it.& take no responsibility whatsoever for any financial profits or loss which may arise from the recommendations given in this blog.