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Kripa Raman

Mumbai , Oct. 14

IDEA Cellular, the three-way joint venture between the AV Birla, Tata and AT&T groups, has nearly achieved financial closure, with the company at the finishing line to closing its debt restructuring exercise.

Long-term syndicated debt of nearly Rs 2,000 crore, lead arranged by IDBI, has been fully arranged for, with only the formal documentation process pending, officials said. "This would happen any time now."

It has taken nearly a year and a half for the syndicated loan to get formalised. IDBI has been lead arranger for the loan, the other participants in the 13 or 14-member syndicate being Life Insurance Corporation, Infrastructure Development Finance Corporation, and a clutch of banks, among them State Bank of India, said institutional sources.

The debt has quickly followed equity infusions which all the three promoters have been making from time to time, and which is almost entirely in place, said officials with the company. The total project cost for Idea Cellular is in the region of Rs 4,500 crore.

Two years ago, the cellular combine had announced its intention to restructure its outstanding loans, some of them taken independently by Birla-AT&T and Tata Cellular before their merger. A larger part of the Rs 2,000 crore of syndicated loan will go towards restructuring earlier debts.

Idea Cellular operates in the circles of Delhi, Maharashtra (including Goa), Andhra Pradesh, Gujarat, Madhya Pradesh (including Chhattisgarh). It has around 18-lakh customers, around 10 per cent of the all-India base and around 25 per cent of the base in the circles of its operation.

The larger players in the Indian telecom industry have reached a stage when they can effect financial closure, said institutional sources. According to them, their pattern of fund-raising and deployment is typical for the telecom industry when, during the early stages, because of the staggered nature of rollout required, the companies had been getting by feeding on equity infusions and several short-term debts.

"Over a period of time when their project achieves a certain size and maturity, long-term debt is arranged to restructure and to consolidate their debt," said an official with one of the lenders.

An illustration of this is the case of BPL Cellular, which despite the financial problems it was known to be facing, and despite its very moderate subscriber-base increase of late, announced its financial closure a few months ago.

"The lenders helped them rejig their business plan; also the institutions felt that the group had a good telecom network, and had generated considerable brand value for itself, not to speak of ground experience," said an institutional source.

According to him, there is quite an appetite still among financial institutions and banks for taking on fund raising for telecom companies backed by large corporate houses. It has helped that valuation of telecom companies has shifted over the years, from looking at customer count and Average Revenue Per User (ARPU) to giving more weightage to the debt-equity ratio of the project and increasingly, to EBITDA (earnings before interest, tax, depreciation and amortisation) and EBITDA-to-debt-levels.

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