Bharti Hexacom sparkles on market debut; stock gain 43% at Rs 814

Shares of telecom service provider Bharti Hexacom surged as much as 54 per cent during their trading debut on Friday. After hitting a high of Rs 880, the stock closed at Rs 814, with a gain of 43 per cent over its issue price of Rs 570. The stellar debut follows a strong response to the company’s Rs 4,275-crore initial public offering (IPO), which was subscribed nearly 30 times. The IPO was the largest since Mankind Pharma’s Rs 4,326-crore share sale in April last year.

Bharti Hexacom, a subsidiary of Bharti Airtel, provides fixed-line telephone and broadband services primarily in two circles—Rajasthan and North East (NE)—and accounts for about 7 per cent of total customers.

JM Financial initiated coverage of the stock with a 'buy' rating and a price target of Rs 790, citing healthy estimated growth in average revenue per user (ARPU) and operating profit (Ebitda).

“We expect Bharti Hexacom’s ARPU to grow at 10 per cent CAGR, consisting of: a) 6-7 per cent ARPU CAGR due to regular tariff hikes; and b) 3-4 per cent ARPU CAGR due to Bharti Airtel’s premiumisation strategy. Bharti Hexacom’s FY24-26/FY24-30 Ebitda CAGR could be higher at about 17 per cent/15 per cent due to presence in high growth potential markets as Rajasthan/NE circle has: a) relatively lower teledensity; and b) relatively lower penetration of high ARPU post-paid and data subs. We initiate coverage on Bharti Hexacom with a BUY (target price of Rs 790) based on 10 times FY26 EV/Ebitda (in line with valuation of Bharti Airtel’s India wireless business),” said the brokerage in a note.

Investment bankers said the strong debut will help improve sentiment towards new share sales, which was dampened by a spate of poor listings in March amid a selloff in small-cap stocks.

Retail investors had given Bharti Hexacom’s IPO a miss, with their allocated quota remaining undersubscribed.

Bharti Airtel holds a 70 per cent stake in the company, while the Government of India now holds 15 per cent through Telecommunications Consultants India (TCIL). In the IPO, TCIL sold a 15 per cent stake.

At the last close, Bharti Hexacom’s market cap stood at Rs 40,700 crore.