Tata Communications OFS: Investors with a long-term perspective can consider subscribing to Tata Communications OFS

MUMBAI: The non-retail portion of the Tata Communications offer for sale (OFS) was subscribed 1.36 times on Tuesday, the first day of the bidding. There were bids for 5.6 crore shares from institutional investors as against 4.6 crore shares on offer. The average bidding price by the non-retail investors was Rs 1183.66.

The government is looking to sell 16.12% stake in the company with a floor price of Rs 1161. Retail investors can subscribe to the offer on Wednesday. Investors with a high risk appetite and a long-term perspective can consider subscribing the OFS as analysts believe that the healthy performance of the company in terms of deleveraging and cash generation every passing quarter will help to erase past memories of under-delivery on guidance.

“While deal closures delays could have near term weakness in revenues, demand outlook is robust in the medium to long term,” said Bhupendra Tiwary, analyst,

. “With stable performance and improved cash flow generation and deleveraging possibilities bode well for the company.”

Shares of Tata Communication declined 6.5% to 1,213 on BSE. Post OFS, the government stake in the company will decline from 26.12% to 10%, The government will sell the remaining 10% of its holding in the company to Panatone

, an investment arm of Tata Sons.

Tata Communication stock has rallied 16% in the last one month and 380% in the last one year driven by the company’s strategic growth plan, focused approach and structural improvement in data segment margins.

According to Naval Seth, analyst at Embay Global, the government’s decision to offload its 26% stake in the company will provide flexibility to management on strategic decisions in the future. “Going forward, with the resumption of businesses and the re-opening of the economy, we expect to see a traction in deal conversion and a recovery in the media portfolio as well.”