INDIA
BUSINESS WORLD -
OCTOBER 2006
THE MONTH THAT WAS...
PROVIDENCE TO PICK 25% IN IDEA FOR RS 4,000 CRORE
Private equity firm Providence Equity Partners is close to picking up a stake in AV Birlaowned Idea Cellular. According to sources, Providence is likely to buy 25% share in the Pune-based telco.
The deal size is pegged between Rs 3,500 crore and Rs 4,000 crore valuing Idea at close to Rs 15,000 crore, said sources.
Citigroup Venture Capital is also believed to be nearing a deal with the telco. However, this could not be confirmed. Whenever a deal is done, we will make the announcement,” he said on phone from London. The Birla group had earlier said they would place the shares with financial investors at the same price at which they acquired them from Tatas (Rs 40.50). The company is likely to make a formal announcement soon, said sources.
Idea Cellular was originally a JV between the Tatas and the Birlas, before the latter bought out the Tatas' 48.14% stake for Rs 4,406 crore. Going by the valuation of the Tatas' stake at Rs 4,406 crore, the total value of the company would be Rs 9,152 crore. Analysts, however, estimate the valuation to be in the range of Rs 15,000 crore to Rs 18,000 crore. As per a document submitted by the company to the department of telecom (DoT), Idea has a net worth of Rs 1,042.92 crore. While the A V Birla group is considering an initial public offer early next year, it was open to a pre-IPO placement to gain from the current interest in the telecom sector.
Earlier, group chairman Kumar Mangalam Birla had said, “We are talking to other private equity groups including Providence for selling the (Aditya Birla) Nuvo stake...since the due-diligence is on, it'll take some time.” The Birlas own 98.3% in Idea of which Aditya Birla Nuvo holds 35.7%, Birla TMT Holdings 44.9%, Grasim 7.5%, and Hindalco 10.1%. However, officials indicated that the group is exploring options of an IPO where about 20% of the Birlas' equity can be sold. The move comes on the back of a revival in the capital market and strong prospects for the telecom sector. MrAga has said Idea plans to invest Rs 2500 crore for expanding operations from the current nine circles to all the 23 circles. The telco has crossed the 10 million subscriber mark and is set to launch operations in two more circles in the next one month.
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