The Board of Directors of Idea Cellular gave its final approval to raise Rs 3500 crore through an equity issue via the QIP route. The shareholders of the company had approved for this round of capital raising in a meeting on January 30, 2018. This decision is part of capital raising plan that would raise Rs 6,750 Crore in capital. A few days ago, the Board had allotted 32.66cr shares to the promoters of Idea Cellular. The total capital raised from this preferential issue stood at Rs 3250 Crore.
Idea Cellular, a wireless operator, is the third largest mobile service provider in India. In October 2017, Idea Cellular received approval from the shareholders and creditors of the company to proceed with its merger with Vodafone. The combined entity would have a subscriber base of 450 million subscribers. The new entity would also have a total spectrum of 1,850 MHz. As per Management statements, the merger is expected to be complete in 2018. The company recently announced a capital raising plan of Rs 6,750 crore through a preferential share allotment as well as a QIP. As per the merger agreement, the net debt-to-EBITDA of the new merged entity was not to exceed 6.5 times. However, the company's losses in 1HFY18 pushed the merged entity’s net debt-to-EBITDA slightly above 6.5 times raising concerns over the viability of the merger.
We expect the company to report revenue de-growth of 2.6 percent over FY17-19E due to (a) 18.5 percent reduction in voice revenues over FY17-19E due to a ~48 percent reduction in voice revenue per minute, and (b) intense competition to reduce data rates by ~85 percent over FY17-19E. EBITDA margin is also expected to decline by 815bps to 20.6 percent in FY19E. The stock is currently trading at 12.1x FY19E EBITDA.
Idea Cellular Ltd is currently trading at Rs 86.15, up by Rs 1.45 or 1.71 percent from its previous closing of Rs 84.7 on the BSE. The scrip opened at Rs 86 and has touched a high and low of Rs 86.9 and Rs 85.65 respectively. The BSE group 'A' stock of face value Rs 10 has touched a 52 week high of Rs 123.75 on 20-Mar-2017 and a 52 week low of Rs 71.5 on 10-Oct-2017. Last one week high and low of the scrip stood at Rs 87.5 and Rs 80.35 respectively. The promoters holding in the company stood at 42.38 percent while Institutions and Non-Institutions held 35.32 percent and 22.3 percent respectively. - IIFL