IGI Logo

Kore Digital 

• Kore Digital is coming out with an initial public offering (IPO) of 10,00,000 equity shares of face value of Rs 10 each for cash at a fixed price of Rs 180 per equity share.
• The issue will open for subscription on June 2, 2023 and will close on June 7, 2023.
• The shares will be listed on NSE Emerge Platform.
• The share is priced 18.00 times higher to its face value of Rs 10.
• Book running lead manager to the issue is First Overseas Capital.
• Compliance Officer for the issue is Purnima Deepak Maheshwari.

Profile of the company

Kore Digital was set up with an object to provide high-end communication solutions to corporate and Telecom Network Operators. The company is a growing passive telecommunication infrastructure provider in Maharashtra, engaged primarily in the business of installing and commissioning of Poles, Towers and Optical Fibre Cable (OFC) Systems in Maharashtra. Passive infrastructure refers to the telecommunication towers for wireless telecommunication services and OFC is used for the purpose of hosting and assisting in the operation of the active infrastructure used for transmitting telecommunications signals or transporting voice and data traffic. Being a passive communication infrastructure Company, the company is focused towards providing passive communication infrastructure services mainly to the Telecom Network Operators, Broad Band Service Operators and Internet Service Providers (ISPs) in Maharashtra, especially in locations in and around Mumbai.

The company has been licensed by Department of Telecommunications (DoT) with the Infrastructure Provider (IP)-I License in the year 2009, under which it can establish and maintain assets Dark Fibres, right of way, duct space and tower for the purpose to grant on lease or rent or sale basis to the licensees of Telecom Network Operators, Broad Band Service Operators and ISPs. It also provided support services such as includes project management for laying of the duct and optic fibre cables, construction of basic transmission and telecom utilities, dark fiber leasing, optical fiber network construction, maintenance of duct and optic fibre and optical fibre project turnkey services to various, Telecom Network Operators & Broad Band Service Operators and ISPs across Maharashtra. Apart from laying the network under the project or own network, it is also engaged in the operations & maintenance activity of the fibre network and preventing the underground optic fiber therein from getting cut due to activities like road repairs, digging and expansion works by various authorities.

Under the IP-I License, last 14 years (from incorporation till 2023), it has commissioned more than 600 pole-based cell sites in and around Mumbai, developed its own network of around 450 KM underground Optic fiber Ducts during the last 5 years and in 2 years, the company has developed and delivered underground fiber optic backbone covering 450 KM underground Optic fiber Ducts in and around Mumbai.

Proceed is being used for:

• Meeting the Working Capital requirements.
• Investment in Strategic Acquisition / Joint Venture.
• General Corporate Expenses.

Industry overview

India has the second-largest telecom network in the world. In India, the total subscriber base stood at 1167.82 million in April 2022. Indian mobile economy is growing rapidly and will contribute substantially to India’s Gross Domestic Product (GDP) according to a report prepared by GSM Association (GSMA) in collaboration with Boston Consulting Group (BCG). In 2019, India surpassed the US to become the second largest market in terms of number of app downloads. The liberal and reformist policies of the Government of India have been instrumental along with strong consumer demand in the rapid growth in the Indian telecom sector. The Government has enabled easy market access to telecom equipment and a fair and proactive regulatory framework, that has ensured availability of telecom services to consumer at affordable prices. The deregulation of Foreign Direct Investment (FDI) norms has made the sector one of the fastest growing and the top five employment opportunity generator in the country.

The Indian telecom market is witnessing unprecedented growth in data consumption. In order to sustain this increase in data uptake and support the proliferation of next-generation technologies such as 5G, internet of things and artificial intelligence, there is a need to ramp up the telecom infrastructure in parallel. More­over, the country’s communications infrastructure needs to be expanded in order to ensure the success of government programmers such as Digital India and the Smart Cities Mission. Both the central and state governments have launched a slew of schemes to create a conducive policy environment for encouraging investments in the telecom infrastr-ucture space. As part of the National Bro-adband Mission, the central government is working to provide broadband access to all villages by 2022. The government has also set a target of creating 10 million Wi-Fi hotspots by 2022, laying an incremental 3 million route km of optical fibre cable (OFC) and increasing the tower density from 0.42 tower per 1,000 of population to 1 tower per 1,000 of population by 2024. It is also working with the state governments to develop innovative implementation models for facilitating right-of-way (ROW) approvals for telecom towers and OFC. 

Pros and strengths

Established Optic fiber network in Maharashtra: Over the past years, the company has commissioned more than 600 Pole based cell sites in and around Mumbai, developed its own network of around 700kms during the last 5 years and in 2 years, the company has developed and delivered underground fiber optic backbone covering 600 kms in and around Mumbai. It has also laid fiber cable of around 2000 Kms for its Telecom Network Operators are Bharti Airtel, Vodafone Idea and Reliance JIO are in Ductrove Innovations Pvt Ltd, Sterlite Technologies Limited and Usha Martin Ltd, in Broad Band Service Operators which runs across Mumbai, Navi Mumbai, Thane, Bhivandi, Kalyan, Panvel, Pune. cities in Maharashtra. Apart from the own network, it has also undertaken Vendor Projects and developed a Network of around 200 Kms for its customers. This fibre network is currently being used by various companies such as companies like _Bharti Airtel Limited, Tata Teleservices, Vodafone Idea. Even after building a network running across 7 cities within Maharashtra, it is continuously expanding its fibre and duct network so as to be able to serve more customer needs and leverage economies of scale.

Efficient Business Model: The company’s growth is largely attributable to its efficient business model which involves careful identification and assessment of the project with emphasis on cost optimization which is a result of executing its projects with careful planning and strategy. Its core business of leasing the fibre and duct on IRU basis to telecom operators is a unique business model which forms a major portion of its revenue. Further the business of leasing the fibre and duct on IRU basis has emerged beneficial for the Telecom operators as there are increasing difficulties and the increasing price of ROW faced by the Telecom operators.  

Co-ordial relationship with its suppliers and contractors: In telecom sector, the mobile signal strength depends largely on the quality of the fibre cables used for transmission of signal from one place to another and the protection of such cable depends on the duct used to protect the fibre. In order to ensure customer satisfaction, quality of the work done and the timely delivery of the work are very important. In many of the projects, the customer provides the details of the suppliers from whom the material needs to be procured for the project. It also have a list of nominated suppliers and contractor with whom it has been working since long and it in the quality of the material provided and the work undertaken by them.

Risks and concerns

Depend on availability and supply and cost of equipments: The timely availability, cost and quality of the equipment’s being supplied to the company plays an important role in building strong foundation and long lasting markets and customers. If any disruption is there in either of the factors mentioned above which are not under its control, including general economic conditions, competition, production levels, transportation costs, government taxes and levies and if, for any reason, its regular/primary suppliers refuse or delay or discontinue the delivery of all or certain equipment’s to it in the quantities it need and at prices that are competitive, its ability to maintain the inventory levels and meet the customer requirements shall come to a temporary standstill and its delivery schedules could be disrupted. Further, it may also not be able to pass on any discounts and/ or increase in the prices of the products to its customers which could affect its results of operations and impact financial condition.

Operations subject to physical hazards and similar risks: The company’s business operations are subject to risks, including but not limited to, fatal accidents and mishaps or other force majeure conditions which are beyond its control. Though before commencement of any project, it undertakes a feasibility study of the site which involves study and identify the strata of the route, soil type, ROW (Right of Way) authorizations required, local hindrances, sleeve adequacy of the road to execute the route, underground utilities laid, if any, etc. However even after conducting the study there are always anticipated or unforeseen risks that may come up due to adverse weather conditions, geological conditions, specification changes and other reasons. In such a scenario, it may be required to provide compensation and related payments in relation to fatal accidents that have occurred at its project sites and as such cannot assure that such accidents will not happen.

Working capital requirements: The results of operations of the company’s business are dependent on its ability to effectively manage its inventory and trade receivables. To effectively manage its trade receivables, it must be able to accurately evaluate the credit worthiness of its customers and ensure that suitable terms and conditions are given to them in order to ensure its continued relationship with them. However, if its management fails to accurately evaluate the terms and conditions with its customers, it may lead to write-offs bad debts and/ or delay in recoveries which could lead to a liquidity crunch, thereby adversely affecting its business and results of operations. A liquidity crunch may also result in increased working capital borrowings and, consequently, higher finance cost which will adversely impact its profitability.

Outlook

Kore Digital operates as a Telecommunication Infrastructure Provider. The company was set up with the objective of offering high-end communication solutions to corporate and Telecom Network Operators. Kore Digital primarily operates in Maharashtra. They offer services like installing and commissioning Poles, Towers, and Optical Fibre Cable (OFC) Systems in Maharashtra. The company has been licensed by the Department of Telecommunications (DoT) with the Infrastructure Provider (IP)-I License in the year 2009. Under the license, they can establish and maintain assets Dark Fibres, right of way, duct space, and tower for the purpose to grant on lease or rent or sale basis to the licensees of Telecom Network Operators, Broad Band Service Operators, and ISPs. On the concern side, the company’s business operations may be affected by Weather Conditions which may restrict its ability to carry on activities related to its construction projects such as digging and laying of ducts and cable. Besides, the company monitor its inventory levels based on its own projections of future demand. Because of the length of time necessary to produce commercial quantities of its products, it must make production decisions well in advance of sales. An inaccurate forecast of demand for any product can result in the unavailability/surplus of products.

The company is coming out with a IPO of 10,00,000 equity shares of Rs 10 each at a fixed price of Rs 180 per share to mobilize Rs 18 crore. On performance front, during the Financial Year 2021-22, the total revenue accumulated is Rs 1693.92 lakh, in comparison from Rs 397.82 lakh in 2020-21, it is good growth approximate 4 times than the previous year. Profit After Tax (PAT) for Financial Year 2021-22 has increased from Rs 25.93 lakh to Rs 217.97 lakh from the previous year. Meanwhile, the company intends to continue to focus on enhancing its project execution capabilities. This continued focus will help it improve its operating capabilities which will help it in timely completion of the projects and within the estimated time and cost, this will again help it to improve margins and simultaneously enhance reputation amongst existing as well as new customers. Further, it intend to leverage its existing equipment’s and employee strength by utilizing advanced tools and skilled manpower so as to increase productivity and maximize asset utilization in projects.