Indian IPO

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Monday, March 20, 2006

Centre asks BSNL to pick consultant for IPO

The government has asked Bharat Sanchar Nigam, BSNL, to appoint a consultant for its proposed IPO. Officials said that the process would be initiated shortly but the company would need a year to meet statutory requirements for the IPO, reports The Financial Express.

According to industry estimate, BSNL is likely to be valued at around USD 8-10 billion. Though the exact percentage of equity divestment has not been announced yet, indications are it is likely to be 5%.

Bharti Tele-Ventures, India’s largest GSM company, has a market capitalisation of USD 16.25 billion. Chances of an IPO by BSNL have brightened, with the contours of the BSNL-MTNL merger becoming clear.

The ICICI Securities-led consortium has submitted its report on the merger of the two PSUs favouring the acquisition of MTNL by BSNL and an IPO by the latter as the preferred option.

However, there are complex issues relating to human resources, stamp duties and other costs involved in the restructuring exercise, which are currently being examined.

“In the past there have been talks of an IPO by BSNL but issues like merger of the two telecom PSUs have delayed it. The government had to take a view on whether MTNL and BSNL should merge before an IPO. Now with ICICI Securities’ report, the direction should be clear,” officials said.

Industry observers maintain that the company would need funds for its expansion, as its profitability is likely to come under pressure in the years to come.

During 2004-05, BSNL’s net profit of Rs 10,183 crore (Rs 101.83 billion), and expects to post a profit of around Rs 8,000-10,000 crore (Rs 80-100 billion) during 2005-06 also.

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