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Ortel revives IPO plan, New Silk Route to exit

MUMBAI: Ortel Communications, Odisha’s leading multi-system operator (MSO), is reviving plans for an initial public offering (IPO) that may raise as much as Rs 300 crore (Rs 3 billion).

The public float will be three times the size of the original issue planned in 2013, a sign that the market is regaining its footing after the Narendra Modi-led BJP government has come to power.

Private equity investor New Silk Route (NSR) is seeking to unload its entire 35 per cent stake in Ortel for anything between Rs 160 crore (Rs 1.6 billion) and Rs 200 crore (Rs 2 billion). NSR was earlier looking at a part exit through the IPO in 2013.

Ortel is looking at a primary infusion of anywhere between Rs 130 crore (Rs 1.3 billion) and Rs 150 crore (Rs 1.5 billion) into the company. The proceeds from the IPO will be used to fund development and expansion of cable television into new territories, broadband and internet telephony services.

“Ortel is planning to file yet again a draft prospectus for an IPO within two months. The aim is to get at least Rs 130 crore into the company. Besides, NSR wants to exit and is looking at getting Rs 160 crore at the lower end of the price band. When Ortel had filed for IPO in 2013, NSR’s intent was to make an offer for sale for half of its holding in the MSO,” a source familiar with the development said.

Post IPO, the promoter holding will fall from 63 per cent to 51 per cent, the source added.

Ortel has progressively narrowed its net loss and is likely to turn net positive this fiscal. Net loss stood at Rs 12.5 crore (Rs 125 million) in FY14, down from Rs 25 crore (Rs 250 million) a year ago.

EBITDA is expected to improve to Rs 55 crore (Rs 550 million) in FY15, from Rs 43 crore (Rs 430 million) a year ago. Revenue is expected to touch Rs 155 crore (Rs 1.55 billion) this fiscal, up from Rs 132 crore (Rs 1.32 billion) in the earlier year.

Carriage revenue is flat at Rs 20 crore (Rs 200 million). The company’s debt stands at Rs 135 crore (Rs 1.35 billion).

“Ortel is poised to become net positive this fiscal. EBITDA is also growing and Phase III digitisation is round the corner. Broadband will be an important part of the company’s growth plan. Besides, the overall market sentiment has improved. The company has increased its IPO size for all these reasons. Scale, however, will continue to be a challenge for Ortel,” said the source.

Ortel has 520,000 cable TV subscribers. The MSO has digitised 14 per cent of its universe while broadband subscribers account for 11 per cent of its network. The footprint spreads across Odisha, Chhattisgarh, Andhra Pradesh and West Bengal.

“A significant chunk of the IPO proceeds will be used for broadband infrastructure, growing the subscriber base and expanding into new territories. Digitising the network will be done through sale of the set-top box to the consumer, vendor financing and internal accruals,” said a source close to the company.

Ortel’s broadband ARPU (average revenue per user) is at Rs 380 (net of tax). ARPU for analogue cable service is Rs 150 while for digital it is Rs 190. The MSO’s business model is to own primary points which provide direct access to the subscriber homes.