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A Capital Win For Hathway

Hathway, India’s leading cable multi-system operator (MSO), is raising Rs3 billion (US$50 million) through a preferential allotment of shares to large-scale financial investor Capital Group.

The price has been fixed at Rs320 per share, in effect a 14% premium to Hathway’s publicly traded closing price as of Sept. 3, 2014. The deal values Hathway at Rs51.6 billion and will dilute the MSO's promoter and promoter group companies (the Rahejas) from a 47.5% interest to 44.7%.

"Considering Hathway’s highly leveraged balance sheet position today, the proceeds from the issue will be mainly used to reduce debt,” says Mihir Shah, VP at MPA (India). Hathway is currently trading at an enterprise valuation of 12.5x its forecast Ebitda for FYE March 2015, while its gross debt to Ebitda stands at a high 3.7x (end-FY14).

Hathway has a pan-India presence spanning over 160 cities and towns with a reach of 11.7 million homes.

As of June 2014, the company had a customer base of ~6.4 million pay-TV subscribers and an installed base of 8.2 million digital subscribers. The company has slowly started to benefit from a legitimate revenue pass on its digital set-top box deployment in government-mandated Phase I and II cities.

Hathway is also investing in capital expenditure to support broadband infrastructure. Its broadband network reached 1.8 million homes passed as of end-June, with 420,000 high-speed internet customers

The company plans to gradually convert all of its broadband customers to higher speed Docsis 3.0 networks and expand to new cities. As of July 2014, the company had 60,000 customers on its higher speed Docsis 3.0 platform.

Arpus and revenue from broadband grew 23% and 26% year-on-year respectively over the June 2014 quarter, while Ebitda expanded 71%.

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