Mumbai-based cable operator Hathway Cable and Datacom Ltd said on Wednesday it has approved a plan to separately list unit GTPL Hathway Pvt Ltd.
VCCircle had first reported on 8 August that Gujarat-based GTPL Hathway planned to go public and that it had hired three investment banks to raise up to Rs 500 crore ($75 million).
Hathway Cable said in a stock-exchange filing that the initial public offering (IPO) of GTPL Hathway will involve a fresh issue of shares and an offer for sale by existing shareholders. The company said it may sell up to 9 million shares of GTPL in the IPO.
It did not specify a timeline for the proposed listing but said an IPO committee is being constituted to oversee the process.
Hathway Cable and GTPL Hathway did not immediately respond to email queries on the proposed IPO.
Hathway Cable owns a 50% stake in GTPL Hathway, which, in turn, owns and has joint ventures with other companies to run operations in Gujarat, Maharashtra, Rajasthan, West Bengal, Assam, Jharkhand, Andhra Pradesh and Madhya Pradesh. It got its pan-India licence in August 2015, according to a Ministry of Information and Broadcasting notification.
GTPL, formerly called Gujarat Telelinks Pvt. Ltd, was set up in 2006 by Anirudhsinh Jadeja and Kanaksinh Rana. In 2008, R Raheja group-backed Hathway Cable acquired a 50% stake in the private firm. Although the deal value was not disclosed, it is believed to have spent around Rs 125 crore to buy the stake.
GTPL reported a net profit of Rs 83 crore on revenue of Rs 640 crore for the year ended 31 March 2016, as per a note by ratings firm CRISIL. This was a sharp increase from the previous year when it clocked a net profit of just Rs 13 crore on revenue of Rs 457 crore. This arguably makes GTPL the most profitable cable operator in the country.
The proposed IPO will be the second public issue in the cable and broadband business in as many years. Last year, another regional player, Ortel Communications Ltd, had gone public.
Ortel, which counts PE firm New Silk Route as a shareholder, had a poor show in the IPO and barely managed to scrape past the target after NSR cut the number of shares it sought to sell in the IPO. The firm had a tepid debut on the bourses but rose a few months later only to see investors lose interest soon after its stock price peaked last October. It is now trading at a discount to the IPO price.
While Hathway Cable is looking to generate cash from the share sale in the proposed IPO of GTPL, the public float would affect its own financials. GTPL and its group firms accounted for about a third of Hathway’s consolidated revenue in FY16, as per its annual report. With the IPO, its holding is likely to shrink below the threshold where it can call it a subsidiary and its top line would shrink. Hathway’s losses, which were partly offset by the profits GTPL made, may also widen.
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