ITI Ltd FPO - Issue Date, Issue Price & Details

ITI Ltd FPO Details

About ITI Ltd FPO

Indian Telephone Industries Limited, commonly known as ITI Limited, is a Central Government-owned manufacturer of telecommunications equipment in India. It was founded in 1948, and today has six manufacturing facilities which produce a range of switching, transmission, access and subscriber premises equipment.[1] It is headquartered at Bengaluru ( Bangalore). It has six Manufacturing Units and eight Regional Offices across India. It has Multi-locational electronic assembly & mechanical manufacturing facilities accredited with ISO 9001:2015, Countrywide marketing and customer support centers and in-house R&D for absorption of technology, indigenous development of products for in-house manufacturing.

It produces GSM mobile equipment at its Mankapur and Raebareli Plants.[2] These two facilities supply more than nine million lines per annum to both domestic as well as export markets. It also produces Information and Communication Technology (ICT) equipment such as network management systems, encryption and networking solutions for internet connectivity, and secure communications networks and equipment for India's military. The company has above 3500 employees as on October 2017.[3]

Issue Details

To part finance working capital (Rs. 642.48 cr.), repayment of high-cost loans (Rs. 607.29cr.), and general corpus fund needs (approx. Rs. 135 cr.), ITI is coming out with its FPO (Fresh Public Offer) of 181800000 equity share of Rs. 10 each. It has allocated 1800000 shares for proportionate allotment to eligible employees. Out of net 180000000 shares ITI has allocated for QIB quota (75%), HNI quota (15%) and Retail quota (10%). It has fixed a price band of Rs. 72 - Rs. 77 and thus mulls mobilization of Rs. 1308.96 cr. to Rs. 1399.86 cr. based on lower and upper price band. The last traded price (as on 22.01.20 closing) of ITI was Rs. 100 on the exchange.

The issue opens for subscription on 24.01.20 and will close on 28.01.20. Minimum application is to be made for 150 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. Issue constitutes 16.85% of the post issue paid-up capital of the company.

Having issued initial equity at par, ITI issued/converted further equity in the price range of Rs. 49.44 to Rs. 107.80, between January 1992 and August 2018.

Post issue its current paid-up equity capital of Rs. 897.00 cr. will stand enhanced to Rs. 1078.80 cr. GoI (Government of India) holding will come down below 75% post this issue.

Joint BRLM's to this issue are BOB Capital Markets Ltd., Karvy Investor Services Ltd. and PNB Investment Services Ltd., while KFin Technologies Pvt. Ltd. (erstwhile known as Karvy Fintech Pvt. Ltd.) is the registrar to the issue.

With this issue, ITI Ltd. is looking for a market cap of Rs. 8307 cr. (based on upper price band).

Financials

For the last three fiscals, ITI has on a consolidated basis posted turnover/net profits (including Government of India Grants) of Rs. 2088.72 cr. / Rs. 266.39 cr. (FY17), Rs. 1811.62 cr. / Rs. 230.56 cr. (FY18) and Rs. 2004.84 cr. / Rs. 92.54 cr. (FY19).

For the first half of FY20, it has earned a loss of Rs. - (54.40) cr. on a turnover of Rs. 603.40 cr. According to management first half is always a lean period for the company's performance. For Q3 of FY20 ITI has posted a net profit of Rs. 168.25 cr. on a turnover of Rs. 827.95. Thus for 3Qs of FY20, it has posted a net profit of approx. 114 cr.

As on 31.12.19, ITI had an order book of Rs. 11051 cr. In addition to r Order Book, ITI Ltd. is selected as the lowest bidder (L-1) by the Ministry of Defence on the ASCON Phase IV Project. Various plans under these projects are expected to be in the range of Rs. 7700 cr. Thus the company is likely to have a healthy order book of Rs. 20000 cr. approx.

For the last three fiscals, ITI has posted (on a consolidated basis) an average EPS of Rs.2.67 and an average RoNW of NA. Based on its NAV of Rs. - (1.46) as on 30.09.19, the issue is priced at a negative P/BV.

If we annualize FY20 earnings and attribute it on fully diluted equity post issue, then asking price at negative P/E as it has posted a loss for H1 of FY20. Q3 performance is indicating much better Q4 for FY20.

Recommendations

ITI Ltd. erstwhile known as Indian Telephone Industries Ltd.) has diversified on many fronts. With its new plans, it can be termed as Indian Technology Innovations Ltd. in true sense. It has a healthy order book indicating sufficient workload for the next 4 - 5 years. ITI is gearing to play an important role in "Digital India" plan. Despite the last traded price of Rs. 100 on the exchanges as on 22.01.20 close, it has fixed a price band of Rs. 72-77 and has thus opted for the investor-friendly gesture. Investment may be considered for long term rewards.