Idea Cellular Ltd’s board on Wednesday approved a proposal to sell shares via a qualified institutional placement (QIP) to raise as much as Rs3,500 crore.
“The board has authorised the committee of directors to decide on the timing, price and exact quantum of equity shares to be issued,” the company said in a filing to stock exchanges on Wednesday.
On 4 January, Idea Cellular’s board had granted in-principle approval for sale of further equity of up to Rs3,500 crore and had set up a committee to evaluate and recommend to the board the routes for issuing further equity.
Subsequently, at a meeting on 30 January, shareholders of the company had approved the proposal to raise the funds through a qualified institutional placement.
The controlling shareholders of Idea Cellular—Birla TMT, Elaine Investments, Oriana Investments—have recently invested Rs3,250 crore to strengthen its balance sheet amid intense competition and before a planned merger with Vodafone India Ltd. Following the QIP, their stake in India’s third-largest telecom operator will rise to 47.2% from 42.4% now.
The proposed capital raising by Idea, the sale of its standalone towers to American Tower Corp. and the potential sale of its 11.15% stake in Indus Towers Ltd will augment the firm’s long-term capital resources, Idea said in a statement on 4 January.
Companies in the debt-laden telecom sector have been hurt by the entry of Reliance Jio Infocomm Ltd, which brought tariffs to rock-bottom and hit the revenue streams of other operators.
Idea Cellular’s loss for December quarter more than tripled to Rs1,285.6 crore as the nation’s telecom regulator halved interconnection usage charges and a tariff war sparked by new entrant Reliance Jio showed no signs of abating.
The Telecom Regulatory Authority of India (Trai) slashed interconnect usage charges—what an operator pays another to land calls on the latter’s network—to 6 paise a minute from 14 paise a minute effective 1 October.
Idea’s bigger rival Bharti Airtel Ltd too was impacted from this cut and reported a 39% fall in December quarter profit to Rs306 crore.
In order to take on competition from Reliance Jio, Bharti Airtel is also in the midst of a debt reduction drive.
On 5 February, the company announced that Singapore Telecommunications Ltd (Singtel) will indirectly raise its stake in Bharti Airtel by investing Rs2,649 crore in Bharti Telecom Ltd, the promoter company of Airtel, through a preferential allotment of shares.
The funds will be used to reduce debt. Singtel’s total stake (along with its affiliates) in Bharti Telecom will increase to 48.9% from 47.17% currently, the statement said.
The investment comes within two years of Singtel’s participation in Bharti Telecom’s rights issue of Rs2,500 crore, which was completed in February 2016.
The Mittal family owned Bharti Enterprises continues to own more than 50% in Bharti Telecom.
As part of its debt reduction exercise, Bharti Airtel had also in December announced that it, along with another group entity, will sell a combined 20% in its DTH arm, Bharti Telemedia Ltd, to private equity firm Warburg Pincus for $350 million.
Idea Cellular shares closed at Rs84.75 at end of trade on BSE on Wednesday.
Source: Mint