Aditya Birla Group to invest Rs 3,250 cr into Idea before merger

An Idea promotion

Idea Cellular said its board of directors have approved the issuance of 32.66 cr shares of the company to its promoter Aditya Birla Group at a price of Rs 99.50 each.

The total infusion will be to the extent of Rs 3,250 cr.

It also said it plans to raise Rs 3,500 cr from third party investors and others. The company’s shares are currently at Rs 104.45.

The issue of shares to the promoter is expected to complete by early February, 2018, post which promoter shareholding will increase to 47.2% from 42.4%.

The move comes just before the completion of the merger of Idea Cellular and Vodafone.

Idea and Vodafone have already thrashed out a detailed methodology for merger, including working out the share swap ratio and so on.

However, since the ratios were arrived at, the Aditya Birla company has seen an erosion in its net worth due to consecutive quarterly losses.

The latest investment is likely to help correct some of the impact of the losses. The merger is expected to be completed in another 3-4 months.

A report in ‘Telecom Paper‘ said Aditya Birla Group will now get a higher stake in the combined entity than was envisaged in the merger announcement.

According to the orginal announcement, Aditya Birla Group was supposed to get only 21.1% stake in the merged entity, following which Vodafone was to transfer a 4.9 percent stake to Aditya Birla Group for a consideration of Rs 3,874 cr.

The company has been tight-lipped today about whether the investment will change the structure of the merger process.

“The Aditya Birla Group remains committed towards the telecom business,” said Kumar Mangalam Birla, Chairman, Idea Cellular.

“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.”

The equity issue is subject to shareholders and other regulatory approvals.

An Extraordinary General Meeting (EGM) of shareholders is to be convened on January 30, 2018.

It also said the director board has also constituted a committee to evaluate potential routes for raising further capital of up to Rs 3500 cr including preferential issue, Oualified institutional Placement (OP) and a rights issue.

“Appropriate disclosures will be made once the Board approves such issuance of additional capital based on the recommendations of the Committee,” it said.

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% stake in Indus Towers, will augment the long term capital resources of the company, it said.

During the first nine months of the financial year 2017-18 idea has added over 33,500 wireless broadband sites and the current 143,500 broadband sites now cover 620 million Indian population (52% of population), it said.

Idea is also moving fast to launch its VolTE services during calendar year 2018.