Tall ambitions

Considering the huge opportunities in the power and telecom sector, companies like BS Transcomm, which manufacture towers and provide turnkey and O&M (operations and maintenance) services stand to benefit .

Through its Rs 204-crore IPO, it aims to fund its ongoing expansion and enhance the working capital. The company augmented its tower-manufacturing capacity from 36,000 tonne to 120,000 tonne in March. It has also integrated backwards by setting up a rolling mill of 90,000 tonne, which has helped improve margins.

Over the next two years, the company plans to expand its tower capacity to 240,000 tonne, which will help cater to the rising capex in user industries and its current order book of Rs 532 crore (57,000 tonnes). With the low margin-trading turnover now absent, operating margins are seen improving to 15-17 per cent.
 

ISSUE DETAILS
Price band (Rs)	257-266
Size (Rs cr)	197-204
Opened on	6-Oct
Closes on	8-Oct
ICRA grading	2/5

 

GROWING FAST
In Rs crore	FY09	FY10
Revenue	337	517
Ebitda	34	61
Ebitda (%)	10.2	11.9
PAT	12	24

At the upper end of the price band, the IPO is priced at a PE of 11 times its annualised 2010-11 earnings (marginally lower than 11-13 times for its listed peers). However, the main trigger could come from its 63.25 per cent subsidiary, SAPL, which provides intelligent data-device solutions that help customers monitor telecom sites remotely and reduce operational costs.

Services like telecom shelters, solar and wind energy solutions and O&M also come under SAPL’s fold. This company has successfully deployed its remote monitoring systems in 1,200 sites for Indus Towers, and its other products are undergoing trials.

Considering the huge domestic opportunity (3.6 lakh towers), a further roll-out along with revenues from solar solutions could drive BS Transcomm’s consolidated numbers in future. However, the SAPL contribution is still small (revenue of Rs 3.4 crore in 2009-10), which is only seen improving over the next two-three years.

Overall, given the competitive nature of the business and low IPO grading, investors with some risk appetite could apply.