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Ortel to invest Rs 68 cr in triple-play growth, 16.7 cr in digital cable

MUMBAI: Odisha’s dominant multi-system operator (MSO) Ortel Communications has revised downwards its investment plans, as is evident from its final red herring prospectus (RHP) filing with the market regulator Securities Exchange Board of India (SEBI).

The investment figures in the draft red herring prospectus filing were higher, amounting to Rs 103.8 crore (Rs 1.04 billion). The MSO intends to expand its network to provide video, data, and telephony triple-play services.

Ortel, which is launching its IPO on 3 March with a price band of Rs 181–200, is offering up to 6 million fresh shares and an offer for sale of 6 million shares from private equity firm New Silk Route (NSR).

While the funds from the offer for sale (net of issue-related expenses for the selling shareholder) will be received by NSR and not by Ortel, the funds received by offering fresh issue will be used for the following purposes:

Expansion of network to provide triple-play services

The company said that for expansion of network to provide video, data and telephony triple-play services, it intends to use Rs 67.98 crore (Rs 679.77 million) from the net issue proceeds. Out of this, it will deploy Rs 30.59 crore (Rs 305.9 million) in FY2016, while the remaining Rs 37.39 crore (Rs 373.87 million) will be deployed in FY2017.

Capital expenditure on development of digital cable services

The company intends to use Rs 16.74 crore (Rs 167.40 million) from the net proceeds as the CapEx on development of digital cable service. It will deploy Rs 7.53 crore (Rs 75.33 million) in FY16, and Rs 9.21 crore (Rs 92.07 million) in FY17.

The funds will be used to deploy back-end equipment and software for providing digital video services on the network.

Capital expenditure on development of broadband services

For its broadband services, the company has proposed to use Rs 10.51 crore (Rs 105.07 million) out of the net proceeds from the issue. It will deploy Rs 4.73 crore (Rs 47.29 million) in FY16 and Rs 5.78 crore (Rs 57.78 million) in FY17 for the broadband expansion.

“We believe that investment in capital equipment will aid our company to expand its network in new locations in the states of Odisha, Andhra Pradesh, Chhattisgarh, and West Bengal, and assist us to realise our long-term growth strategy of deeper penetration in existing geographies and entry into new geographies,” the company said in its Red Herring Prospectus.

In its earlier RHP filing in September 2014, Ortel had said that it would use Rs 73.6 crore (Rs 736 million) out of the IPO proceeds for expansion of network for providing video, data and telephony services. The MSO would utilise Rs 19.9 crore (Rs 199 million) for digital cable services and Rs 10.3 crore (Rs 103 million) for broadband services. The remaining amount would be used towards general corporate purposes and issue expenses.

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