Post QIP, Aditya Birla Group needs to buy 4.9% from Vodafone in merged entity

Industry:    2018-05-14

There will be no change in Idea Cellular’s merger terms with UK’s Vodafone as the Aditya Birla Group (ABG) stake has shrunk back to 42.56% from 47.2% after the Kumar Birla-led telco raised Rs 3,500 crore through qualified institutional placements (QIP), three people aware of the situation said.

The Birlas will now need to buy 4.9% from Vodafone and not 2.5% – estimated after Idea’s recent capital raising programme – to initially hold 26% in the Idea-Vodafone India merged entity. Consequently, Vodafone will initially hold 45.1% stake in the merged entity and not 47.5% indicated earlier this year, after Idea’s capital raise, one of the persons cited above told ET.

“There have been no material changes and Idea will increase its stake to 26% in the merged entity after buying close to 5% from Vodafone, which will own a little over 45%,” a spokesman of the British carrier told ET.

Back in February, Idea had said in a BSE filing that the AB Group’s stake had risen to 47.2% from 42.4% after the company raised Rs 3,250 crore through a preferential allotment of over 32.66 crore equity shares at Rs 99.50 a unit to three promoter group entities – Birla TMT Holdings, Elaine Investments Pte, Singapore and Oriana Investments Pte, Singapore.

However, the ABG stake has dropped to 42.56% after the follow-up Rs 3,500-crore QIP to eligible investors, a person with direct knowledge told ET. Idea Cellular did not respond to ET’s queries till press time. In January, Idea had announced plans to raise Rs 6,750 crore to pare debt and free up cash ahead of its merger with Vodafone India and had targeted a first tranche of Rs 3,250 crore through a preferential allotment to AB Group entities.

Idea’s board then constituted a committee to explore options to raise another Rs 3,500 crore through another preferential allotment, qualified institutional placements, rights issue or any such route determined by the board.

Earlier this year, Vodafone Group said once ABG ownership in Idea increases to approximately 47% (from 42.4%) following the round of capital raising, the Birlas would need to buy a minimum 2.5% of the merged entity from Vodafone or such higher stake required in order for ABG to ultimately own at least 26% of the merged entity.

That will no longer be the case with the Aditya Birla group stake in Idea dipping to just a shade over 42%. Under the terms of the merger, the Aditya Birla Group will subsequently have the right to acquire an extra 9.5% (over and above its 26% in the merged entity) from Vodafone, failing which Vodafone will be required to reduce stake down so both Idea and Vodafone have equal shareholdings in the combined entity over a period of time.

Vodafone and Idea are very close to sealing the deal, having sent separate but similar mails to customers and vendors, underlining how their merger will benefit all.

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