Business - Mother of All IPOs

The proposed mega public listing of Bharat Sanchar Nigam Ltd (BSNL) moved a step ahead with the government indicating a valuation of about Rs 2,00,000 crore for the state-owned telecom behemoth.

Although this is far below the earlier estimates of Rs 4,00,000 crore, the telecom giant’s initial public offering (IPO) would still by far be the largest in Indian corporate history with its size pegged between Rs 15,000 crore to Rs 20,000 crore for a dilution of minimum 10 per cent equity shares.

The IPO is most likely to be an offer for sale by the government, which currently owns 100 per cent in the company.

The valuation is based on the assumption that each share will be priced between Rs 300 and Rs 400 at the time of listing as disclosed by telecommunication minister A Raja.

However, Kuldeep Goyal, chairman, BSNL, said the IPO would fetch close to Rs 40,000 crore as the company, that received spectrum for a pan-India roll out of third generation (3G) services on Thursday, may be valued at Rs 4,00,000 crore.

No timeframe, however, has been set for the IPO. “There is no immediate need for it but we are preparing the ground work already (and) we are seeing some positive reaction from the union on the issue.”

BSNL has paid up capital of Rs 5,000 crore comprising of 500 crore equity shares of Rs 10 each and preferential capital of Rs 7,500 crore.

The proposed IPO of BSNL has been hanging balance for over a year as the management and employees have failed to arrive at a consensus on the contentious issue. The management has been planning an IPO to fund its expansion. A top BSNL official said the company has sufficient cash reserves and there was no need to issue fresh equity.

Analysts feel that BSNL has large passive infrastructure, a pan-India optic fibre cable network, cash reserves of around Rs. 40,000 crore and prime real estate worth more than Rs 40,000 crore.

In 2006-07, BSNL earned a net profit of Rs 7,805 crore on a revenue of of Rs 39,750 crore. It is behind Airtel and Vodafone in mobile telephony with a subscriber base of 4.2 crore, but leads in the fixed line segment with a pan-India subscriber of 3.8 crore as of June 2008.

The listing would also help BSNL achieve the Navaratna status as government is contemplating make public listing mandatory for central public sector undertakings for joining the elite club.