Viom may go for London Stock Exchange listing in Q3

Viom Networks, India's second-largest tower company with a footprint of 42,000 towers and tenancy ratio of 2.3x, is looking at raising capital to fund its growth, which is expected to be in double-digits for the next three years.

Syed Safawi, chief executive officer, Viom Networks told dna, "Post the recent auctions, telcos are looking at a growth of 12% year on year – after a gap of three years. Tower valuations are thus set to rise 17-18% by next year, with at least 50,000 more tower tenancies (excluding Reliance Jio which plans to set up 70-80,000 towers for its 4G rollout) and about 10-15,000 more towers being set up."

He said, "Viom is targeting a chunk of this upcoming business and is looking to raise capital in excess of Rs 1,500 crore to cater to this burgeoning demand. Airtel alone will take up 4,000-5,000 towers over the next year for 2G, 3G and 4G use from Viom. We believe this is the second wave of growth quietly sweeping the telecom sector."

Over the next three years, Viom is looking at adding another 12,000 to 15,000 towers. "The number of non-diesel sites is already at 25%. This will increase to over one-third in the next few years," said Safawi.

Viom has hired Citibank and Credit Suisse as well as London-based consulting firm, STJ Consultants, to explore feasible options for raising this capital.

"We may look at an IPO in India or the US or the UK, or a Singapore-based business trust model. We also have interested private equity players who have approached us. By third quarter, we are looking at finalising these plans, based on what shareholders decide," said Safawi.

While the Indian IPO may be a possibility this year -- its lucrativeness depending on market capitalisations post the elections, and also the fact that telecom subscribers may reach 1 billion in the next three years -- an international listing has a higher possibility.

A source requesting anonymity said the company would most likely list on London Stock Exchange.

Viom, which reported revenues of Rs 5,000 crore last year, and for the first time in two years a profit after tax of Rs 80 crore - which this year has grown by 50%, is clear that its capital raising exercise is not at attempt at reducing debt.

The company has already reduced its Rs 8,000 crore debt by 25%, and is steadily working towards lowering it through ways like shrinking capex and reducing opex by 15%, focusing on the three main tenants – Airtel, Vodafone and Idea Cellular -- and increasing portfolio share from existing 25%.

"This March, we have doubled our 2G site rollout and tripled our 3G site rollout, as compared with last year. This is thanks to us being in a better operational standing today, and also due to saturation of tenancies from Indus Towers," he said.

Viom is also looking at a possible acquisition of a smaller tower company.

"We believe that the way we have seen indirect consolidation on the telecom operators' side, there will be two or three strong national tower company formations which will serve seven-eight telecom operators.

That is a win-win model for everyone. Viom will be at the centre of one of these formations. There will be a natural consolidation in these three formations. In the next 18-24 months, we should have more clarity on how the consolidation will take place," said Safawi.

The tower giant is also looking at increasing its dollar revenues by expanding footprint to two other geographies in Asia before the year end, after its first successful foray out of India last year to Myanmar.

Also, Viom NEXT, a three-year strategy planned to transform the company, will focus on increasing tower and tenancy base by double digits year on year, targeting incumbent operators to form over a quarter of our customer portfolio, and focusing on emerging business revenue to contribute substantially to Viom's revenues.

"Therefore, as part of Viom NEXT, we are driving our revenue targets by double-digit CAGR, aiming at cash operating registering a CAGR of almost 20% and profit before tax growth of high double-digit percentage levels. Including the international business, our emerging business portfolio will aim at achieving over 10% of Viom's revenue in few years," said Safawi.