Idea Cellular, the telecom division of the Aditya Birla Group, has decided to raise up to Rs 6,750 crore ahead of its merger with Vodafone. The move will alter the shareholding pattern of the company.
The board of Idea Cellular has approved raising about Rs 3,250 crore from entities under Aditya Birla Group. It has also constituted a committee to evaluate potential routes for raising further capital of up to Rs 3,500 crore.
The shares will be issued to promoter entities under Aditya Birla Group-Birla TMT Holdings Private Limited, Elaine Investments Pte Ltd (Singapore), Surya Kiran Investments Pte Ltd (Singapore) and Oriana Investments Pte Ltd (Singapore).
As a consequence of the change in shareholding in Idea following the capital raise, the two parties have agreed that Aditya Birla Group will buy a minimum of 2.5 percent of the merged entity from Vodafone for Rs 1,960 crore.
The issue is expected to be completed next month following regulatory approvals. After the issue, the shareholding of the promoter group in Idea will increase to about 47.2 percent from the existing level of around 42.4 percent.
According to the Idea-Vodafone merger announcement, Vodafone had to own 45.1 percent of the combined company after transferring a 4.9 percent stake to Aditya Birla Group for Rs 3,900 crore in cash, concurrent with the completion of the merger. The Aditya Birla Group will then own 26 percent of the combined company and Idea's other shareholders will then own the remaining 28.9 percent shares.
Country's second and third-largest telecom companies Idea Cellular and Vodafone are merging their businesses to create India's biggest phone company with over 400 million customers. The merger is likely to close as early as March-April and is on way to receiving a final set of approvals. However, a fierce price war triggered by Reliance Jio might also wipe out the intended benefits of the deal.
Hurt by sturdy competition given by Reliance Jio, Idea's consolidated losses had surged to Rs 1,107 crore for the 2017 September quarter from Rs 328 crore for the three months ended on March 31, 2017.
According to a Bloomberg report, the revenue of the combined entity had declined 12 percent in the year to September 2017. Its earnings before interest, tax and depreciation and amortisation had also plunged 31 percent during the period.