Robi gets nod for country’s biggest ever IPO

Highlights

• Robi to collect Tk523.7 crore from investors
• Tk136 crore of it to come from its employees
• Remaining shares to be offered to public at a face value of Tk10 each
• Money to be spent on network expansion
• IDLC Investments to work as the issue manager
• Paid-up capital Tk4,700 crore
• 2019 annual revenue Tk7,400 crore, net profit below Tk20 crore
• 2019 EPS Tk0.04, net asset value per share Tk12.64
• 2020 first half net profit Tk77 crore, EPS Tk0.16

Robi Axiata Ltd, the country's second largest cellphone operator, has got the securities regulator's approval to collect Tk523.7 crore from investors through the biggest ever initial public offering (IPO) in the history of Bangladesh stock market. 

Robi is going to expand its network with the investors' money.

Following the approval, the Bangladesh Securities and Exchange Commission (BSEC) on Wednesday said the company was accumulating Tk136 crore of the fresh capital from its employees under an employee stock purchase plan.

The remaining shares will be offered to public at a face value of Tk10 each.

"This is indeed a historic moment for Robi. The approval to be listed in the stock markets paves the way for the people of the country to become shareholders of the multinational company," Robi said in a statement on Wednesday. 

Leading local merchant bank IDLC Investments is working as the issue manager to help Robi accomplish the IPO process. 

The firm said in a press statement, "As the second telecommunication sector entrant to the capital market, the listing of Robi will significantly boost market capitalisation."

Grameenphone, the telecom market leader, came to the stock market to collect Tk486 crore 11 years ago. The highly profitable company then got Tk60 in premium per share from investors on top of the face value of Tk10 each and also attracted a large number of new investors to the stock market.

Now a Tk1,350-crore paid-up capital company, it posted an annual revenue of Tk14,365 crore and a net profit of Tk3,451 crore for 2019, resulting in annual earnings per share (EPS) of Tk25.56.

Because of its high profit margin and consistent high cash dividends, the market rewarded Grameenphone with pricing each of the Tk10 face value shares at Tk337 on Wednesday. It is the market capitalisation champion at the two local bourses, with the amount being more than Tk44,000 crore. 

However, profitability and EPS are a different story for its competitor Robi, although the latter is already a Tk4,700-crore paid-up capital company. 

Till the end of June last, Robi secured 4.8 crore subscribers, representing nearly 30% of the market share while the number of internet subscribers stood at 3.2 crore to represent 67% of the market share. 

The acquired subscriber base under its two brands "Robi" and "Airtel" along with some other minor additional services together brought the company a total annual revenue of Tk7,400 crore in 2019. 

But the gigantic company's low profitability made equity analysts cautious, since the company had filed for IPO in the first quarter this year. 

In 2019, Robi made a meagre net profit of less than Tk20 crore while the EPS was Tk0.04 only. 

Previous years' struggle pushed the company to the negative average profit territory. The weighted average EPS of the last five years was negative Tk0.13. 

At the end of last December, net asset value against each Robi share was Tk12.64 without asset revaluation.

Against a flat revenue amid the Covid-19 pandemic in the first half of this year, Robi made a net profit of Tk77 crore (EPS Tk0.16). The company incurred losses during the same period last year. 

Shahed Alam, chief corporate and regulatory officer of Robi, told The Business Standard the company had been investing a lot for a stronger footing in the industry, which amounted to the annual average of $250 million in recent years. "It also had to spend a lot to accomplish the merger of Robi and Airtel in 2016."

Following the post-merger integration and other costs, now the subscriber base and quality of network and services will help Robi improve its profitability, believes Shahed. 

The company said in its statement, "We hope the government will positively consider certain conditions we had placed for listing in the interest of the prospective investors."

In all the recent press briefings, Robi had blamed the increased minimum tax on turnover which was affecting it and other market players more than the market leader Grameenphone because of their thin profit margin. 

In 2019, the 2% minimum tax on turnover ate up 95% of the operating margin, which might stand at 80% this year if the government does not consider requests to rationalise the tax, said the company. 

The company also requested the government to reduce its corporate tax to 35% after listing from of the existing rate of 40% for listed telecom operators and 45% for non-listed ones. 

However, the ongoing pro-competition regulatory measures, namely significant market power (SMP) regulations, against the market leader, Grameenphone, are helping other companies, including Robi, to compete better, noted sector analysts who are cautiously analysing the approved IPO. 

Robi commenced operations in 1997 as the Telekom Malaysia International (Bangladesh) under the brand name Aktel. In 2010, it was rebranded as Robi and the company changed its name to Robi Axiata Ltd.

After the merger with Airtel Bangladesh in 2016, the company emerged as the second largest telecom operator and retained the same name. The merger also helped the company see profits later. 

Currently, Robi's controlling 68.69% of shares are held by Malaysian telecom giant Axiata Group Berhad. Following Japanese NTT Docomo Inc's exit this year, Delhi-based Bharti Airtel is the second major investor in the company.