BS Transcomm

DSIJ Intelligence / 11 Oct 2010

BS Transcomm (BSTL) is engaged in the business of providing services to telecommunication infrastructure providers for setting up their passive infrastructure and to power transmission companies for setting up their transmission lines and sub-stations. The company is tapping the equity market with its initial public offering to garner Rs 197 – 204 crore at its upper and lower price band of Rs 257 – 266 respectively.

BS Transcomm

BSTL is a Hyderabad-based company which has made its presence felt across several infrastructural domains like power transmission & distribution (T&D), telecom and renewable energy. The company started as a steel trading firm and later scaled up value chain by setting up its own plant for making galvanized steel towers having applications across the power & telecom industry. BSTL’s core competence lies in erection of T&D towers for the power industry. In telecom sector, BSTL can erect both roof-based towers (RBT) and ground-based towers (GBT) and also provide operational and maintenance services for the same through its subsidiary ‘Sugan Automatics Private Ltd’ (SAPL). In the renewable energy domain, BSTL provides wind hybrid solutions for telecom towers which lower the diesel consumption for generators which are installed on the tower.

The Objectives of the Issue are:

Part-funding of expansion in tower manufacturing and galvanizing capacity from 36,000 MTPA to 1,20,000 MTPA (i.e. an increase in installed capacity by 84,000 MTPA) and setting up of the backward integrated structural mill with an installed capacity of 90,000 MTPA
Funding of expansion in tower manufacturing and galvanizing capacity from 1,20,000 MTPA to 2,40,000 MTPA (i.e. an increase in installed capacity by 1,20,000 MTPA)
To part-finance margin money for working capital for the project
To fund general corporate purposes
To meet expenses of this issue
To get the equity shares of the Company listed on the stock exchanges.

The company has a strong order book of Rs 554.45 crore. Power transmission EPC contracts account for 85 per cent of the consolidated order backlog of Rs 472.57 crore, while telecom towers & turnkey contracts bring in remaining 15 per cent of orders amounting to Rs 59.11 crore. With the acquisition of SAPL, BSTL is scaling up the value chain by providing value-added services like remote site monitoring solutions & SIM card integration as well as operational and maintenance services for the telecom towers. SAPL has already implemented ‘Intelligent Data Device’ across 2000 telecom towers, which are operated by several telecom players across the country. The company has a good clientele base which consists names like Power Grid, Indus Towers, Reliance Infratel, to name a few.

BSTL’s plan to scale up the value chain in product/service offering is the key success factor in favor of the company and the primary investment rationale. SAPL could also be the primary growth driver as it offers the maximum growth potential in value-added services. Entering into long-term operational and maintenance contracts with telecom towers should result in strong cash flows as well as improved profitability. BSTL's FY10 EPS on the post-diluted equity base stands at Rs 10.83. BSTL is likely to trade at a P/E multiple of 23.71 - 24.5x on its lower and upper price bands of Rs 257 – 266 respectively. Book value of BSTL post the equity dilution exercise stands at Rs 135. P/E multiple demanded by BSTL appears to be on the higher side leaving very limited scope of upside. The market cap to sales for is likely to be at 0.50 – 0.52x on its upper and lower price bands respectively. We suggest our investors to refrain from subscribing to the issue.

Issue Information	Rating
Issue opens on	6-Oct-10
Issue closes on	8-Oct-10
Issue Size (No. of Shares)	76.79 lakh equity shares
Price Band (Rs.)	` 257-266
Issue Route	Book Building
Promoters	Rajesh Agrawal, Rakesh Agrawal & Mukesh Agrawal
Post Issue Equity	2.18 crore equity shares
Lead Managers	JM Financial Consultants
Listing	BSE, NSE
Retail Portion	26.88 lakh equity shares
QIB Portion	38.39 lakh equity shares
Non Institutional Portion	11.52 lakh equity shares

Financial Performance (`/Cr)
	Q1FY11	FY10
Total Income	162.27	516.69
Operating Expenses	132.51	456.45
Operating Profit	29.76	60.23
Interest	7.05	18.64
Depreciation	2.70	5.72
Net Profit	13.36	23.71