Idea to raise Rs 6,750 cr ahead of Vodafone merger

Idea Cellular on Thursday unveiled a plan to raise up to Rs 6,750 crore, which will alter the shareholding pattern of the company and have a bearing on its merger agreement with Vodafone.

The board of Idea Cellular on Thursday  approved raising about Rs 3,250 crore from entities under the promoter Aditya Birla Group (ABG) and constituted a committee to evaluate potential routes for raising further capital of up to Rs 3,500 crore.

In a separate statement, Vodafone Group said that as a consequence of the change in shareholding in Idea following the capital raise, the two parties have agreed that ABG will buy a minimum of 2.5% of the merged entity from Vodafone for Rs 1,960 crore.

"The Board of Directors of Idea Cellular Limited (Idea), today approved issuance of about 326.6 million equity shares, face value of Rs 10 per share, at a price of Rs 99.50 per share (in accordance with SEBI ICDR Regulations) on preferential basis," Idea said.

The shares will be issued to entities under the Aditya Birla Group -- Birla TMT Holdings Private Limited, Elaine Investments (Singapore), Oriana Investments Pte Ltd (Singapore), Surya Kiran Investments Pte Ltd (Singapore) and aggregate capital infusion will be of Rs 3,250 crore.

The issue is expected to be completed by early February 2018, subject to regulatory approvals, post which the shareholding of promoter group in Idea will increase to about 47.2% from the existing level of around 42.4%. As per the Idea-Vodafone merger announcement in March, Vodafone had to own 45.1% of the combined company after transferring a 4.9% stake to ABG for Rs 3,900 crore in cash, concurrent with completion of the merger. The Aditya Birla Group will then own 26% of the combined company and Idea's other shareholders will own the remaining 28.9%. The 2.5% equity sale transaction between Vodafone and ABG, following change in shareholding pattern of Idea, will reduce funding requirement on Vodafone Group from Rs 9,350 to Rs 7,390 crore to meet debt arrangement for the merged entity.

"Vodafone's ownership in the combined entity is expected to be approximately 47.5% at completion. The aforementioned changes to the capital structure were already contemplated in the scheme of arrangement for the merger.

"Vodafone's stake in the combined entity in excess of 45.1% will not be subject to any lock-up after closing and Vodafone will be free to sell the relevant shares without restrictions," Vodafone said.

The earlier joint announcement by the two companies called for locking of equity for three years, barring both ABG and Vodafone from selling share to a third party.

Vodafone Group said that ABG's ownership may change further depending on the form, size and result of the second tranche of the capital raise. With the fundraising plan of Idea, Vodafone Group said it expects the merger deal between the two telecom operators to close in the first half of 2018.