British telecom giant Vodafone is toying with the idea of launching an Initial Public Offer (IPO) for its Indian business. According to a Bloomberg report, the company has appointed investment bank Rothschild to study the prospects for a float. Vodafone is likely to take a call on the IPO after receiving the study from Rothschild which is expected in August 2015. If the company decides to go for a listing on Indian stock exchanges, the paperwork is expected to be in place by March 2016 while the IPO’s timing will be decided later, factoring in market performance and risk appetite.
Reports suggest the company can mop up USD3 – 4 billion (INR19,132 – 25,500 crore) through the public issue. Representatives of Vodafone and Rothschild declined to comment.
With more than 18 crore customers, Vodafone is the second largest telecom operator in the country. Its revenues in the financial year ended March 2015 jumped 12.6% to INR42,352 crore as customers started consuming more data services. The Indian arm accounts for nearly 10% of Vodafone’s global annual revenues. According to a report by CNBC-TV18, Vodafone India’s enterprise value is estimated at nearly INR1.90 lakh crore. This compares with the market capitalization of around INR1.63 lakh crore for rival Bharti Airtel. It is important to note that enterprise value and market capitalization are related but not comparable. Enterprise value is arrived at by adding debt and subtracting cash from market capitalization.
Vodafone’s India outing has been eventful ever since it acquired Hutchison Telecommunications International Ltd’s stake in Hutchison Essar Ltd (HEL) in 2007 under a deal routed through Cayman Islands. Owing to the transaction, the company is currently involved in a bitter tax dispute with the Indian government that could affect it to the tune of INR20,000 crore. In light of the dispute, it appears unlikely that the company will opt for the IPO before the tax matter is resolved.