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The Aditya Birla Group (ABG) is infusing fresh life into its telecom network Idea Cellular, with a host of promoter group companies picking up preferential equity of up to ₹3,250 crore.
The company’s board — which approved the share sale on Thursday — has also formed a committee to evaluate how to raise a further ₹3,500 crore. The options on the table include another issue of preferential equity shares, a rights issue and a qualified institutional placement. This is a precursor to the merger between Idea Cellular and Vodafone India
In Thursday’s announcement, a press release from Idea Cellular said that promoter group entities — Birla TMT Holdings Pvt Ltd, Elaine Investments Pte. Ltd. (Singapore), Oriana Investments Pte. Ltd. (Singapore) and Surya Kiran Investments Pte. Ltd. (Singapore) – will pick up about 32.66 crore shares in the company at ₹99.50 apiece. Stock of Idea Cellular had closed at ₹102.55 on Wednesday and ₹104.50 on Thursday on the BSE.
The equity issue is subject to shareholders and other regulatory approvals. The Extraordinary General Meeting (EGM) of shareholders is to be convened on January 30. The issue is expected to complete by early February 2018, post which the shareholding of promoter group in Idea will increase to about 47.2 per cent from 42.4 per cent.
As a consequence of the change in shareholding in Idea following the capital raise, ABG will buy a minimum of 2.5 per cent of the merged entity from Vodafone, or higher stake required in order for ABG to own at least 26 per cent of the merged entity. Consequently, Vodafone will receive minimum proceeds of €256 million from such sale. Vodafone’s ownership in the combined entity is expected to be 47.5 per cent at completion. Vodafone’s stake in the combined entity in excess of 45.1 per cent will not be subject to any lock-up after closing and Vodafone will be free to sell the relevant shares without restrictions.
The proposed capital raising along with recent announcement of Idea’s standalone towers sale to ATC and the potential monetization of Idea’s 11.15 per cent stake in Indus Towers, will augment the long-term capital resources of the company, the press release added.
Kumar Mangalam Birla, Chairman, Idea Cellular Limited said in the statement: “At a time when the telecom industry is going through a challenging environment, this equity infusion by the group in Idea is another step towards reinforcing the group’s commitment (to the telecom business).”
On Idea’s balance sheet-strengthening plans, Mayuresh Joshi, Fund Manager, Angel Broking, said: “This move was necessitated by the fact that Idea needed to ramp up its product offerings and at the same time strengthen its infrastructure requirements. “
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