ITI share price has gained in recent times as the company proposed a further public offering (FPO), details of which are likely to be provided soon.
The public sector undertaking, supplier of telecom equipment to BSNL and MTNL, had talked about its FPO plan after announcing second-quarter numbers.
ITI had said that the public offering is intended to raise funds by issuing 18 crore shares along with an additional 18 lakh shares (1% for eligible employees).
The company is now looking to raise about Rs 1,600-crore, through the proposed FPO which will open on January 24 and close on January 28.
ITI has an order book worth ₹22,000 crore to be executed over three years. It has been listed since the mid-90s. The Centre holds an 89.7% stake in ITI with the Government of Karnataka holding 3%.
According to the Securities and Exchange Board of India (SEBI) regulations, a listed company should have a minimum public shareholding of 25%.
Post FPO, the government holding will come down to below 75%. QIIs (qualified institutional investors) will hold 15% and high net worth individuals (HNIs) and the general public 10%.
After making losses for 14 years, the company, which was once the sole telecom equipment provider for the country, made a profit of Re 27 crore in 2017-18. A year later, it posted Rs 1,870 crore turnover and a profit of ₹110 crore.
ITI adopted a strategy from installing, implementing and maintaining all projects by itself to appointing third parties like L&T, Huawei and Ericsson and others. This is positively impacting its profitability and margins.
ITI has also participated in fresh tenders worth over Rs 6,000 core in the last 2-3 2/3 months and has a success rate of 40%. Therefore, its growth outlook is very positive and the future looks bright.
Net net this being in an OFS offer, this money which the company will be raising from the public will not go to the company but will directly benefit the Government which continues to hold a majority stake here.
While long term prospects look bright, ITI’s business model is a B2B business that offers limited scope for margin improvement and is a play on volumes.
Hence it is unlikely to offer any significant value and wealth creation opportunities in the short term but longer term with business outlook looking good and strong order book FY20 and FY21 would be better.
Order execution will be crucial for the successful completion of these pending orders to get reflected in topline and bottom-line ahead.
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