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Why Maxis IPO Will Be Of Great Interest

By Pallavi S

  • 11 Nov 2009

Maxis, the Malaysian promoter of Indian telecom operator Aircel, is raising around $3.3 billion for the Malaysian telecom unit in its home market, billed as the biggest issue in that country. The IPO will value the Malaysian telecom operations of the company at $10 billion.

Although a large part of the money is expected to be used to pay off debt of the parent, some of the proceeds of the issue are also likely to be invested to expand the parent’s business in India and Indonesia, which are growing faster and seen as a more lucrative business.

The issue would mark the return of Maxis as a public company. In 2007, Maxis’ controlling shareholder T Ananda Krishnan took the company private to separate and expand its international operations in India and Indonesia.

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Delisting of some large companies has led to outflow of foreign money from Malaysian capital market. To restore foreign investor confidence and get them to return to the country, Malaysian Prime Minister Najib Razak has been pushing for new issues. Although he convinced Maxis promoters to come up with a large issue and get re-listed, the management decided to keep the more valuable businesses of India and Indonesia outside the purview of the upcoming IPO.

Today, Maxis is said to have fixed the institutional tranche of the offering at 5 ringgit a share. Institutional offering accounts for around 90% of the share sale out of which foreign investors account for two-thirds. A formal statement is awaited from Maxis.

After the share sale, the parent company Maxis Communications Bhd. (45% owned by T Ananda Krishnan and 25% owned by Saudi Telecom) will control 70% of Malaysian cellular operator. For some investors, the valuation of the issue appears to be stretched as it does not include the more attractive Indian operations but for some others, the company is seen as a dividend play and investors could be looking at the issue for its prospective dividend payouts. Maxis executives have said they intend to pay out 75% of the company's net profits as dividends, partly to support the expansion of the parent company's overseas businesses including India.

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