MUMBAI: Hathway Cable & Datacom plans to utilise Rs 5.8 billion out of the net proceeds of its proposed initial public offering (IPO), bulk of which will be for customer acquisition and digitisation of cable TV.

Hathway is looking at a valuation of $900 million-to-$1 billion, an industry source says. The multi-system operator (MSO) will have a public issue of up to 27.75 million, consisting of a fresh issue of up to 2 million equity shares (Rs 10 each) and an offer for sale of 7.75 million shares.

Private equity investors ChrysCapital and Morgan, who are partially exiting through an offer for sale, are expected to get around $80 million.

"The final valuation of Hathway, however, will depend on the pricing of the IPO through the book building process," the source avers.

Post IPO, the promoters‘ holding will fall to 49.24 per cent while News Corp‘s stake will dilute from 20.2 per cent to 17 per cent. The foreign holding, in fact, will fall from 42.74 per cent to 31.33 per cent, following the IPO.

Hathway will utilise Rs 2.44 billion towards acquisition of MSOs and LCOs (local cable operators), Rs 1.56 billion for digital capital expenditure, services and set-top boxes, Rs 830 million for broadband infrastructure and Rs 967 million for repayment of loans. Hathway has a debt of Rs 4.01 billion (as of 31 March 2009) on a standalone basis and Rs 4.34 billion on a consolidated basis.

The company, which filed a preliminary draft prospectus for its IPO, posted a consolidated revenue of Rs 6.73 billion in FY‘09 while EBITDA stood at Rs 1.03 billion.

Hathway incurred a net loss of Rs 620.60 million for the fiscal ended 31 March 2009. The net worth of the company (as of 31 March 2009) was Rs 5.15 billion.