ITI Limited FPO

Started in 1950, Indian Telephone Industries Limited (ITI) is a Bengaluru based public sector company operating under the department of telecommunications. It has customers from diverse industries including defence, banks, telecommunications, financial institutions, information technology, and solar energy. The company has a wide product range; some of them are manufactured by in-house manufacturing units and some with other technology partners. The product portfolio of the company includes optical and data network products, defence security encryption products, passive infrastructure products, multi-capacity encryption units, set-top boxes, smart energy meters, smart cards, and mini personal computers. Apart from this, the company also provides operation and maintenance of base transceiver stations (BTS), Aadhaar authentication services, National Population Register (NPR), annual maintenance contracts (AMC), and data centre hosting solutions. Some of the famous Public Sector Units (PSUs) such as Bharat Broadband Network Limited (BBNL), Energy Efficiency Services Limited (EESL), Ministry of Rural Development (MORD), and Bharat Sanchar Nigam Limited (BSNL) are the customers of ITI Ltd. The company is also engaged in some government projects such as ASCON, BharatNet, Smart Energy Meters, and E-Governance Projects. ITI Ltd has 5 manufacturing units located at Mankapur, Bengaluru, Palakkad, Naini and Raebareli. It also has an R&D center in Bengaluru. As on August 31, 2018, it had 3,427 employees. As on 31.12.19, ITI had an order book of Rs. 11051 cr. In addition to the Order Book, ITI Ltd. is selected as the lowest bidder (L-1) by the Ministry of Defence on the ASCON Phase IV Project. Various plans under these projects are expected to be in the range of Rs. 7700 cr. Thus the company is likely to have a healthy order book of Rs. 20000 cr. approx. As per financial performance, ITI Limited has posted total income/net profits of Rs. 1903.99 cr. / Rs. 304.88 cr. (FY17), Rs. 1802.60 cr. / Rs. 230.56 cr. (FY18) and Rs. 2004.84 cr. / Rs. 92.54 cr. For upto Q3 of FY20, company has posted profit of Rs 114.4 Cr on total revenue of Rs 1579.68 Cr. So company has shown zig-zag performance. Company has posted losses in FY15 and also in Q1 of FY20. ITI has posted an average EPS of Rs. 2.67. Issue is priced at a P/BV of 4.14. As per trailing earnings, P/E is around 49 and with FPO price its around 45. As per RHP, there is no listed peers. So issue looks fully priced and price difference is around 30% from CMP of Rs 100 (22.01.20). On BRLM's front, for BOB Capital Markets Limited, Karvy Investor Services Limited and PNB Investment Services Ltd, have handled 2 IPOs in last three fiscals, and out of which 1 opened below issue price and remaining opened above issue price on the day of listing. As of now, from last 2 IPOs, all are trading above issue price. ( As on 22.01.20 ) As per financials, results are improving, RoE is 8.47% and healthy order book indicates upcoming years should be good for company. Performance of BRLMs are good and price difference of around 30% gives good listing gain scope. So we give SUBSCRIBE rating to this IPO and one may hold for long term investment also.

• 1 The President of India, acting through the Department of Telecommunications, Ministry of Communications,Government of India