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Idea Cellular to tank up Rs 6,750 crore ahead of merger with Vodafone

The Board has approved raising about Rs 3,250 crore from the entities under the promoter Aditya Birla Group by issuing 32.66 crore equity shares on a preferential basis

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Idea Cellular on Thursday announced plans to raise Rs 6,750 crore, ahead of its proposed merger with Vodafone India.

The Board of Idea Cellular approved raising about Rs 3,250 crore from the entities under the promoter Aditya Birla Group by issuing 32.66 crore equity shares on a preferential basis.

It has also formed a panel to evaluate potential routes for raising further capital of up to Rs 3,500 crore. This will happen by selling shares or by a rights issue, preferential issue or a share sale to institutions.

"The Board of Directors of Idea Cellular Ltd (Idea), today approved issuance of about 326.6 million equity shares, face value of Rs 10 per share, at a price of Rs 99.50 per share (in accordance with SEBI ICDR Regulations) on preferential basis," Idea Cellular said in a statement on Thursday.

The issue is expected to complete by early February, 2018, subject to regulatory approvals, post which the shareholding of Promoter group in Idea will increase to about 47.2% from existing level of around 42.4%.

In March last year, Idea and Vodafone announced their merger which will create the largest telecom player in India. The merger is expected to close in the first half of this year. As part of the deal, Aditya Birla Group had agreed to buy a minimum of 2.5% stake of the merged entity from Vodafone to own at least 26% of it.

Mayuresh Joshi from Angel Broking said, "The fund-raising plan will definitely aid Idea Cellular in terms of deal apprising in their balance-sheet. The move was also necessitated by the fact that Idea needed to ramp up its product offerings and at the same time strengthen its infrastructure requirements."

The only issue that plagues the balance-sheet is excessive debt in terms of spectrum liabilities as well as liabilities for operating purposes which create a huge burden on their cash flows. The fund-raising exercise was mandated both in terms of upgrading the network as well as creating better services in terms of bandwidth and efficiencies to be offered to their customers to compete with the competitors, Joshi said.

Last year, Aditya Birla and Vodafone had said they will eventually own an equal share of the joint venture.

"The Aditya Birla Group remains committed towards the telecom business. The group is 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," Idea Cellular chairman Kumar Mangalam Birla said.

Idea will also explore potential monetisation of company's 11.15% stake in Indus Towers -- its joint venture with Bharti Airtel and Vodafone. During the first nine months of the financial year 2017- 18, Idea has added over 33,500 wireless broadband sites and currently, it has about 143,500 broadband sites, as per the statement. Idea also has plans to launch its VoLTE (Voice over 4G network) services in 2018.

MONEY CALL

  • The Board has approved raising about Rs 3,250 crore from the entities under the promoter Aditya Birla Group by issuing 32.66 crore equity shares on a preferential basis
     
  • It has also formed a panel to evaluate potential routes for raising further capital of up to Rs 3,500 crore. This will happen by selling shares or by a rights issue, preferential issue or a share sale to institutions
     
  • The issue is expected to complete by early February 2018, subject to regulatory approvals, post which the shareholding of Promoter group in Idea will increase to about 47.2% from existing level of around 42.4%
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