Bharti Infratel to Sell 10% in IPO to Raise $1 b

Move aimed partly at providing exit option to existing shareholders

 Bharti Infratel, the tower arm of Bharti Airtel, is planning an IPO to raise around $1 billion by selling a 10% stake, partly to provide an exit to existing shareholders. 

The proposed issue is likely to value Bharti Infratel at around $10 billion, 20% lower than the valuation it enjoyed in February 2008, when leading US-based private equity (PE) firm Kohlberg Kravis & Roberts (KKR) picked up a 2% stake in it for $250 million. Since the company raised $1.25 billion in 2007-08 from PE firms, it needs to give them an exit option, said an official involved in the process. 
Apart from a partial stake sale by PE firms, the company would also issue fresh shares for the proposed issue to fund its expansion plans. Bharti Infratel has informally appointed Standard Chartered Bank and Morgan Stanley as merchant bankers and is also in discussion with two other investment banks, another person familiar with the development said. 
In last fiscal, Bharti Infratel reported an operating profit of . 3,159 crore on a turnover of . 8,515 crore that includes a proportionate share of its revenues in Indus Towers. When contacted, a company spokesperson declined comment. 
India's telecom sector, a darling of investors for almost an entire decade since 2000, has witnessed a sharp erosion in valuations due to stiff competition and the recent corruption scandal over 2G spectrum allocations, said another official involved in the process. 
The number of telecom towers under Bharti Infratel's control has risen significantly from 49,400 towers in February 2008 to 78,400 towers. While the firm owns 32,792 towers, it also has a 42% stake in Indus Towers, which owns 1,08,566 towers. Indus Towers is a three-way joint venture between Bharti Infratel, Vodafone-Essar, which also owns 42% and Idea Cellular, which owns a 16% stake. 
So far, no tower company is listed in India, though two other companies had drawn up plans to do so and even filed draft prospectuses with market regulator Securities and Exchange Board of India (SEBI). Anil Ambani-controlled Reliance Infratel intended to list the company in 2008-09 and last year, Viom Networks, a joint venture between Tata Teleservies and Kolkata based Quippo Infrastructure had planned an IPO. 
Leading international investors Temasek Holdings, The Investment Corporation of Dubai (ICD), Goldman Sachs, Macquarie, AIF Capital, Citigroup and India Equity Partners (IEP) had, in December 2007, invested $1 billion in Bharti Infratel. This was followed by KKR's investment in February 2008. 
"The PE firms are not looking at exiting at this point of time as valuation is not favourable. However, they need to have a readily available exit option which is only possible after listing," a senior official of a PE firm that invested in Bharti Infratel said. 
Clear Signals 

• Bharti Infratel would also issue fresh shares for the proposed issue to fund its expansion plans 

• So far, no tower company is listed in India 

• Anil Ambani-controlled 
Reliance Infratel planned to list the company in '08-09 

• Last year, Viom Networks, a JV between Tata Teleservies & Quippo Infrastructure, planned an IPO 
$10b 
Likely valuation of the company after the propsed IPO 
$250m 
Money paid by US-based PE firm KKR to buy a 2% stake in Bharti Infratel in Feb 2008