Hathway Sluggish After IPO

Leading cable MSO  Hathway Cable & Datakom got its IPO out the door, raising the funds it needed for its next stage of growth, but its share price has gone south since its Feb. 25 debut.

On its first day debut, Hathway shares edged down 13% to Rs209/US$5 and softened a notch further on Feb. 26 to close at Rs201, equivalent to about Rs31 bil./US$670 mil. in market value. According to MPA analysis, this implies a valuation benchmark of about 21x Hathway’s FYE March 2010 EBITDA, somewhat justifiable given Hathway’s solid growth prospects, built around last mile acquisitions, profitable broadband deployment and a stable TV subscription revenue stream.

If Hathway does all of this with good execution over the next two years, investor sentiment will improve. Hathway will need positive sentiment as it will undoubtedly need to raise money in about three years time in order to acquire and compete further in the marketplace. The company is currently the most profitable pay-TV distribution platform in India at the EBITDA level with RGUs of more than 2 mil. (TV plus broadband).

Hathway is one of about 10 Indian companies (including cable MSO DEN) who have seen shares slide upon debut over the past eight months. Hathway raised Rs6.7 bil. or US$144 mil. from its IPO, money that will be used to finance local cable operator acquisitions, digital TV deployment, broadband upgrade and loan repayments.