R K Infratel To Come Up With An IPO

In the run for getting listed on the Indian bourses, it is now R K Infratel (RKI), who has come up with an IPO to list its equity shares. RKI has come up with an offer of 57.50 lakh equity shares to the public at a face value Rs 10 each. This fresh issue will be offered in a book building method. A minimum of 50% of the issue - 28.75 lakh equity shares – constitutes of QIB. And out of the remaining 50%, 15% (8.62 lakh equity shares) will be allocated to non-institutional buyers and 35% (20.12 lakh equity shares) to retail buyers.

This issue represents 38.67% of the total paid up equity shares after the issue. Before the issue, RKI has 91.20 lakh equity shares, which will rise to 148.70 lakh equity shares after the issue. Further, the Book Running Lead Managers for this issue is IndBank Merchant Banking Services Ltd.

RKI is engaged in the business of providing infrastructure services like optical fibre cable (OFC), OFC blowing, OFC splicing, and Turnkey Solution (OFC and Copper) for connectivity. The company was incorporated in the year 2000, and is based in Surat, Gujarat. Primarily, the company was operating as a cable television operator in Surat. It had its own analogue network, which was then converted into hybrid fibre co-axial network. RKI started its OFC infrastructure services for telecom companies in the year 2005. It caters to various sectors like Telecom, Cable Television, Internet Services, Power and Oil & Gas.

With the IPO funds, the company intends to utilise the raised fund to set up OFC Network in South Gujarat, to acquire the National Long Distance License, license for Operating Internet Services as ISP, to fund additional working capital requirement and the general corporate expenses. The proposed OFC development will be spread across an approximate 720.99 kms in South Gujarat, which will consequently enhance the reach of the company. For acquiring long distance license, the expected funding is Rs 650 lakh, while the future working capital requirement is expected to be Rs 1562.40 lakh.

The telecom industry is limited to urban and developed areas of India, while there is no penetration in rural areas. The major reason for this is a lack of infrastructure for the network. However, the government has amended the Telecom Policy in 2011. As per the new policy, the companies have to provide high-speed and high-quality broadband services through optical fibre by FY14, to all the village panchayats. This creates a good opportunity for RKI to work in.

However, the company has not disclosed the issue price and the minimum bid lot size. So at present, we cannot draw a focus on whether one should go for this issue or not. So keep watching this space for further details.