Know Your IPO: Prabhat Telecoms (India)

Prabhat Telecoms India (PTIL) is yet another company that has filed a DRHP with the BSE SME platform. The company plans to issue 33.25 lakh fresh equity shares at a fixed price of Rs 80 to raise an amount of Rs 26.6 crore. The market makers’ portion in this public issue is reserved at 1.68 lakh equity shares. The company will also issue 3.5 lakh equity shares through a pre-IPO placement to raise an amount of Rs 3 crore. The lead managers for this offering are Guinness Corporate Advisors.

PTIL is engaged in the sale and distribution of telecom products like mobile handsets and accessories. The company is headquartered in Mumbai and distributes various brands of mobiles like Fly, Kyocera, Tata Sky, Micromax, etc. as well as data cards through its mobile shops and online portal. Along with the selling and distribution of other brands’ handsets, the company has also launched its own handsets named ‘V3’.

On the financial front, the topline of the company for fiscal 2013 stood at Rs 220 crore, up from Rs 198 crore in the last fiscal. The revenues came in mainly from the sale of handsets. Its operating expenses also increased by 10% to Rs 211 crore on a yearly basis. The EBITDA for the same period grew to Rs 9.66, marking a growth of 60%. The bottomline stood at Rs 3.53 crore as compared to Rs 1.81 crore in the previous fiscal.

The company intends to utilise the net proceeds of the issue to set up a greenfield assembly line and a quality control & testing laboratory, expansion of the existing assembly line, to enlarge its retail chain format, set-up a regional office in New Delhi and to part finance its incremental working capital requirement.

India is a country with a large number of mobile users. The mobile handset manufacturing industry is dominated by a few of giants like Nokia, Samsung and Micromax. Other handset manufacturers like Lava, Spice, and Karbonn also have a considerable presence in the Indian market due the features they offer at comparatively lower prices. PTIL has just started manufacturing handsets under its own brand name and has no brand recognition among customers. In view of where the company stands in the overall telecom sector in the country, we suggest that investors stay away from this issue.