Reliance Infratel is all set to come out with issue of nearly 9 crore shares, the second IPO from the ADAG Group. It is worthwhile pointing that the company is basically into passive infrastructure in the telecom space. According to sources, the issue size is around 8.9 crore shares which by the way constitutes only 10% of the post issued equity.

The best part about all this is that it has part payment option for retailers. Point to be noted here is that Reliance Power also offered same sops to the retail investors who had applied for it’s recently concluded Rs 11,560 crore IPO, the country’s biggest primary market issue so far. It had offered a flat discount of Rs 20 a share to them, nearly 4% of the issue price of Rs 450 and a part-payment facility wherein an investor could apply for the issue with a 25% payment.

Initial signs are that the company will have around 36,849 towers by the end of March 2008. At this moment of time, it owns nearly 23400 towers. I have information that these towers at present are operating at nearly 1/3^rd occupancy because the anchored tenant in these towers is Reliance Communications and its subsidiaries.

Another important thing that one must take into consideration is the fact that the company has a firm roll out order of 16,000 towers for which it’s going to come to the market and these have to be delivered by March 2009 at an estimated cost of Rs 4,623 crore. Therefore, I am pretty much sure that this IPO will be in the range of Rs 5,000 to Rs 5,500 crore which gives the valuation of USD 12.5 to USD 13.7 billion.  In terms of financials, it has Rs 900 crore for the 9-month period of FY08 and Rs 150 crore in bottom line, therefore by the end of FY 08, revenues of Rs 12,000 crore and nearly Rs 200 crore worth of profit can be expected for the company.

Reliance Infratel posted a net profit of Rs 154 crore in the nine months ended December 2007 on total income of Rs 902 crore. On the other hand, its operating profit before tax at Rs 247 crore. A Macquarie Equities research report valued RITL at Rs 54,400-71,000 crore while RITL’s valuation stands at $13.1 billion to $14.9 billion (Rs 51,247 crore to Rs 58,288 crore), according to a Deutsche Bank report. Both the valuations were based on the discounted cash flow (DCF) method.

Reliance Infratel is part of the Reliance Anil Dhirubhai Ambani Group. Its business is to build, own and operate telecommunication towers and related assets at designated sites and to provide these passive telecommunication infrastructure assets on a shared basis to wireless service providers and other communications service providers under long-term contracts.