Bharti Infratel Drops After Biggest Indian IPO in 2 Years

Bharti Infratel Ltd. (BHIN), a unit of India’s largest wireless operator, slumped on its trading debut after raising 41.7 billion rupees ($761 million) in the country’s biggest initial public offering in two years.

The shares dropped 13 percent to 191.65 rupees at the close in Mumbai today, compared with a 0.6 percent gain in the benchmark BSE India Sensitive Index. (SENSEX)

Bharti Infratel, the New Delhi-based unit of telecommunications operator Bharti Airtel Ltd. (BHARTI), set the listing price at 220 rupees apiece.

“The IPO price was probably too high and the return on investment isn’t very attractive,” said Deven Choksey, managing director at K.R. Choksey Shares & Securities Pvt. in Mumbai, which didn’t recommend buying the stock in the initial sale. “The IPO served as an exit option for older investors and isn’t likely to generate much returns for existing investors.”

Bharti Infratel’s return on capital was 3.1 percent in the year ended March 31, compared with parent Bharti Airtel’s 5.3 percent, according to data compiled by Bloomberg.

About 10 percent of Bharti Infratel’s stock was sold in the IPO, with retail investors paying 210 rupees a share. The sale to institutions and wealthy individuals was at 220 rupees apiece.

Today’s decline reduced Bharti Infratel’s market value to $6.6 billion from $7.6 billion at the listing price. In 2008, KKR & Co., the New York-based buyout firm, agreed to invest $250 million in Bharti Infratel, valuing the company at $12.5 billion.

Bharti Airtel increased 0.1 percent to 319.05 rupees today.

Exit Option

The stock was marketed at between 210 rupees and 240 rupees each, according to the IPO prospectus. Institutions and wealthy individuals bid for all of the 148.4 million shares reserved for them, while retail investors sought to acquire 12.2 million shares, according to data on the National Stock Exchange’s website on Dec 14.

The listing will provide an exit for companies such as Temasek Holdings Pte, Goldman Sachs Group Inc. and Citigroup Inc., which bought a $1 billion stake in 2007. As part of the offering, Bharti Infratel sold shares to 18 anchor investors, including Alliance Bernstein and Wellington Management Co., who agreed to hold the stock for at least 30 days.

Bharti Infratel operates 34,220 towers used by mobile-phone companies, its prospectus shows. Revenue, including of units, rose 11 percent to 94.52 billion rupees in the year ended March 31, according to the prospectus.

NMDC Sale

Bharti Infratel’s IPO was the largest since state-owned Coal India Ltd. (COAL) raised about 154.8 billion rupees in October 2010. It comes after India’s government this month raised 58.3 billion rupees by selling a 10 percent stake in NMDC Ltd. (NMDC), the nation’s largest iron ore producer. Initial offerings by PC Jeweller Ltd. and Credit Analysis & Research Ltd. were oversubscribed several times.

Indian stocks are poised for their biggest annual advance since 2009, after Prime Minister Manmohan Singh eased rules to allow more overseas investment to revive economic growth and avert a downgrade of the nation’s credit rating.

To contact the reporter on this story: Rakteem Katakey in New Delhi at rkatakey@bloomberg.net

To contact the editor responsible for this story: Jason Rogers at jrogers73@bloomberg.net

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