More articles by

Nachiket Kelkar
Nachiket Kelkar

TELECOM

Idea plans Rs 6,750 cr fund raising ahead of Vodafone merger

idea-reuters [File] Representative image | REUTERS

Ahead of the proposed merger with rival Vodafone India, Idea Cellular, India's third largest telecom operator, has unveiled plans to raise Rs 6,750 crore to augment long-term capital resources.

As a part of the plans, the Aditya Birla Group company will issue 32.66 crore equity shares to promoter group companies Birla TMT Holdings and/or Elaine Investments Pte Singapore and/or Oriana Investments Pte Singapore and/or Surya Kiran Investments Pte on a preferential basis for an aggregate consideration of Rs 3,250 crore.

The preferentail share issue, which is subject to shareholder and other regulatory approval, is expected to complete by early next month. Post the issue, the promoter group shareholding in Idea Cellular will increase to 47.2 per cent, from the existing 42.4 per cent.

Separately, the Idea Cellular board has also constituted a committee of directors to evaluate potential routes for raising further capital of up to Rs 3,500 crore via another preferential issue, qualified institutional placement or a rights issue.

Kumar Mangalam Birla, the chairman of Idea Cellular said the Aditya Birla Group remained committed to the telecom business and was in the process of creating a large digital infrastructure.

“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,” Birla said.

Idea said it is aggressively expanding its wireless broadband coverage and capacity with focus on 4G services. It is also planning to launch VoLTE services during calendar 2018.

Analysts say, Idea needed the additional investment to ramp up its product offerings and also strengthen its infrastructure requirements.

“The competition in terms of a new entrant offering a better and a more efficient product necessitated the ramping-up of this investment,” said Mayuresh Joshi, fund manager at Angel Broking.

“This clearly is an indication that the management is very hopeful that only a small group of players will remain. Out of them, the top 3-4 players will need to strengthen the infrastructure network in terms of spectrum offerings as well as product efficiencies to facilitate customers to migrate to the new network for which additional capital flow is a primary necessity,” added Joshi.

India's telecom industry has seen a wave of consolidation in last couple of years. In March 2017, Idea and the Indian unit of UK-based Vodafone agreed to merge. The Competition Commission of India as well as the shareholders and creditors of the two companies have already approved the merger of the two companies. The Department of Telecom and National Company Law Tribunal are yet to approve the deal.

In a separate filing on the London Stock Exchange on Thursday, Vodafone said it expects the merger to be completed in the first half of the calendar 2018.

With the promoter Group increasing its stake in Idea, Aditya Birla Group will now buy a minimum of 2.5 per cent stake of the merged entitiy from Vodafone to ultimately own at least 26 per cent of it, Vodafone said in the filing. Over time, the two entities are expected to have an equal shareholding in the merged company.

Idea Cellular shares closed up 1.9 per cent at Rs 104.50 on Thursday.

This browser settings will not support to add bookmarks programmatically. Please press Ctrl+D or change settings to bookmark this page.
Topics : #Idea | #Vodafone

Related Reading