Spice Communication Limited is entering Indian primary market with a Public issue of 137,985,000 equity shares of Rs.10 each. The issue is a 100% Book Built. Below are the salient features of this issue:
Business of the Company
Spice Communications Ltd. is in the business of providing mobile telephony services. It started its operations in 1997. It is the second largest cellular service provider in Punjab and the sixth largest in Karnataka. Company till the date of 31st March, 2006 has a subscriber base of about 2.45 million in these states. Out of this, about 1.92 million were pre paid and about 0.53 million were post paid customers.
The company is promoted by the Mr. Dilip Modi. He is also promoter of other companies in the Modi family.
Spice Communication Ltd. is a loss making company. For the FY ended June 30, 2006, the company clocked a turnover of Rs. 680 crores. The restated net loss for the same period was about Rs. 69 crores. For FY 2007, till September’2006, company had clocked a turnover of Rs.185 crores and a net loss of Rs.25 crores. For FY 2005 and FY 2004, the top line was Rs. 643 and Rs. 554 crores approximately. The net profit for FY 2005 was Rs. 7 crores and for FY 2004 net loss was Rs. 23 crores.
Particulars of the Issue
Spice Communication Ltd. IPO is a fresh 100% Book Building issue of 137,985,000 Equity Shares of Rs. 10 each. At least 135,985,000 Equity Shares of Rs. 10 each is reserved for the retail investors.
Basis for Issue price
Spice Communication Ltd. claims that it’s a strong player in its circle of operations. It claims it is the second largest operator in Punjab. Its strategic investor TM is considered as one of its strong point. It claims it has a vibrant brand name and strong management team.
Objects of the Issue
Primary objects of the issues are payment of long term debt, payment for NLD/ILD license fees and meet capital expenditure requirements. About Rs. 64 crores will be used for NLD and ILD fees and related expenses. Also another object of the issue is the obvious listing gains of its equity shares.
Following are the key risks which can impact company’s performance:
a. Certain Persons forming part of Promoter Group are involved in certain legal proceedings and regulatory matters, some of which may have a significant impact on business, financial condition and results of operations. Some of these are for defaulting on loan re-payments.
b. Company is a regional player in the cellular services industry and significant competition from larger, national cellular service providers may have a material adverse effect on our profitability.
c. Customer base is small.
d. Company has made significant losses in current financial year and also in the past.