Detailing BSNL's IPO

It is only a matter of time before the Initial Public Offering of the country’s largest communications service provider BSNL (Bharat Sanchar Nigam Limited) hits the Indian markets. Plans for the release of the BSNL IPO have been there right from the beginning but was placed on the back burner because India’s staunch Left parties opposed the divestment of the government’s flagship communications provider.

Things have however changed since the Left are no longer in a position to oppose the government.

The initial framework for the divestment of BSNL had been undergoing modifications .There are still disagreements whether the limit to divest will be five or ten percent all of which will be sold off in the IPO. For the government, this is a major and a positive step.BSNL is a fully integrated company in which the government holds a One Hundred Percent stake.

By divesting just 10% it not only manages to hold the gargantuan 90% stake but also drive home the point that it does not need to protect it’s Public Sector Companies to an absolute extent.

BSNL hopes to raise an astounding Rs.40, 000 Crore through its IPO. The proposed price band sees a single share trading via it’s Face Value of ten rupees in the market at a proposed lower limit of Three Hundred rupees and an upper limit of Four Hundred rupees .The only hindrance that the IPO is currently facing in it’s launch is the agreement that is yet to be reached between the government and the union workers of BSNL.

The government has announced that at least 500 shares will be available to BSNL employees at the face value of ten rupees only. Once this detail is worked out the IPO will definitely hit the Indian markets. Telecom minister A.Raja has said that he plans to release the IPO within the time frame of the current year.

From an investor point of view, BSNL should be considered a good deal. Even though BSNL is India’s largest communications provider it still ranks in third when it comes to mobile, broadband and telephony services. There is still a cumbersome way to go for it to catch up to the market leaders Airtel and Vodafone. For the initial going BSNL was the market leader and was number two till last year but has been overtaken since then.

There is however little cause for concern because even though Vodafone and Airtel have overtaken BSNL, they have done so only via a slender margin. BSNL has lost its #1 position based on the fact that it has added fewer customers in the past year as compared to the other telecom companies. Something clearly reflected in its revenue figures.

With the advent of 3G and a head start in terms of spectrum allocation, BSNL is ready and is guaranteed a lead when it comes to adding newer customers in the next few months. Things will however get more competitive after a year when private players are also ready to start their own 3G services.

With the Indian telecom sector promising to grow at a rapid pace, BSNL looks ready to capitalize. The IPO is only just a start.