* Stock falls as much as 12.7 pct on trading debut
* Tower operators' outlook clouded by revoking of cellular
* Bharti Infratel IPO was India's biggest in two years
By Devidutta Tripathy and Denny Thomas
NEW DELHI/HONG KONG, Dec 28 Bharti Infratel Ltd
, backed by billionaire Sunil Mittal, dived as much as
12.7 percent in its trading debut after raising about $760
million in India's biggest IPO in two years, weighed down by a
cautious outlook for mobile tower operators.
The IPO, priced near the lower end of an indicative range to
ensure success, struggled to find interest from retail investors
and was supported mostly by overseas institutional buyers, a key
pillar in the Indian stock market.
Bharti Infratel's poor trading debut is unlikely to deter
future offerings in India, bankers said, with strong foreign
fund bids expected to underpin the share market.
"It's early days and the stock should settle in the course
of the next day or two. If the foreign flows continue, the
market will remain buoyant which should translate into more
deals," a person familiar with the Bharti Infratel IPO said. "If
not IPOs, there should be more follow-on offerings."
Already, privately owned Axis Bank Ltd has
announced plans to raise fresh equity capital, and the source
said a possible listing of National Stock Exchange is among the
other IPOs that investors can expect.
Bharti Infratel's listing follows a tepid first half in IPO
deals, and is the biggest after state-run Coal India's
$3.5 billion issue in 2010.
The listing pushed India's IPO volume to $1.28 billion this
year, shy of last year's $1.36 billion, according to Thomson
Reuters data. But that is still short of the record set in 2007
when Indian corporates raised $8.65 billion through IPOs.
IPO volumes are expected to improve further on rising
foreign capital inflows. Several high-profile deals including
the potential IPO of Vodafone Group Plc's India unit are
likely to hit as earlier as next year, bankers said.
Including follow-on share offers, share sales volumes in
India jumped 70 percent from a year earlier to $14.8 billion,
according to Thomson Reuters data.
The market will likely remain busy in 2013 with two large
share sales in state-run Oil India Ltd and NTPC Ltd
set to come in the next few weeks as part of the
government's plan to raise around $5.5 billion by exiting part
of its stakes across a slew of companies.
"The quality of companies do matter a lot. Investors are
latching on to good quality names or where corporate governance
and business risks are far lower," said Dhananjay Sinha, the
Mumbai-based co-head of institutional research at Emkay Global
Bharti Infratel, a unit of top Indian mobile phone
carrier Bharti Airtel Ltd and partly owned by KKR & Co
Ltd, was at 192.70 rupees as of 0655 GMT on Friday.
That was down 12.4 percent from its IPO price of 220 rupees
for funds and wealthy investors, who received the majority of
the allocation. Bharti Infratel sold shares to retail investors
at 210 rupees and to cornerstone investors at 230 rupees.
The broader NSE index, which has surged about 28
percent this year and is Asia's third best-performing market,
was up 0.5 percent.
Bharti Infratel's share performance was poor compared with
the surge in shares of Credit Analysis and Research Ltd
and PC Jeweller Ltd ,
both of which made their market debut this week after raising
around $100 million each.
Weighing on the outlook for mobile tower operators, an
Indian court this year revoked permits of several wireless
carriers while demand growth for third and fourth-generation
mobile data services slowed.
"The business of towers is under stress," said K.K. Mital, a
portfolio manager at Globe Capital in New Delhi. "This is a
business with a long gestation period and also not something
retail and HNIs (high net worth investors) easily understand."
Shares of GTL Infrastructure Ltd, the only other
mobile tower operator listed in India, have slumped 90 percent
in the last two years, hit by debt repayment worries.
Bharti Infratel priced its IPO at lower valuations to
overcome those concerns, and managed to attract more than a
dozen cornerstone investors including units of Morgan Stanley
and Citigroup Inc.
Bharti Infratel sold about 146 million new shares, or more
than three quarters of the shares on offer, while four of its
private equity investors, including Singapore state investor
Temasek Holdings and the private equity arm of Goldman
Sachs Group Inc, sold a total of 42 million shares as
they cashed out of some of their early investments.
The selling price was at a steep discount to the $1 billion
that seven funds including Temasek and Goldman arm had paid in
2007 for a combined 9 percent stake in Bharti Infratel. KKR
separately invested $250 million in 2008, but its exact holding
is not known.
Bharti Airtel, which owned 86 percent of the tower operator
before the IPO, did not sell any shares in the process.
Bank of America Merrill Lynch, Barclays Plc
, Deutsche Bank AG, HSBC Holdings Plc
, JPMorgan Chase & Co, Standard Chartered Plc
and UBS AG were the foreign banks
underwriting the IPO.
India's Kotak Mahindra Bank Ltd and Enam
Securities were the domestic banks handling the share sale.
Bharti Infratel has about 34,000 towers and owns 42 percent
of Indus Towers, the world's largest tower operator. Along with
Indus, Bharti Infratel has a 38 percent share of the Indian
telecommunications tower market.