Idea Cellular announced the intention to raise up to $1.1 billion (INR67.5 billion) of equity ahead of its merger with Vodafone India to pare debt and free up cash for expansion.
The board of Idea Cellular has approved raising the amout from the entities under the Aditya Birla Group (ABG) by issuing 32.66 crore equity shares on a preferential basis. After the preferential allotment, ABG will increase its ownership in Idea from approximately 42% to approximately 47%.
The proceeds from this capital raise, in addition to the proceeds from the announced disposals of Vodafone India’s and Idea’s standalone tower businesses, will be used to strengthen the balance sheet of the merged entity (Vodafone India and Idea).
“At a time when the telecom industry is going through a challenging environment, this equity infusion by the group in Idea is another step towards reinforcing the group’s commitment,” Idea Chairman Birla said in a statement.
As a consequence of the change in shareholding in Idea following the capital raise, ABG and Vodafone have agreed that ABG will buy a minimum of 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.
Consequently, Vodafone will receive minimum proceeds of $312 million (INR19.6 billion) from such sale and Vodafone’s ownership in the combined entity is expected to be approximately 47.5% at completion.
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.
