MOSL: IDEA CELLULAR (Buy)-Creating a war-chest to deal with competition; raises INR35b via QIP
IDEA CELLULAR: Creating a war-chest to deal with competition; raises INR35b via QIP
(IDEA IN, Mkt Cap USD4.7b, CMP INR83, TP INR110, 32% Upside, Buy)
- Idea Cellular (IDEA) announced that it has completed equity issuance of INR35b via the qualified institutional placement (QIP) route (@INR82.5, 10% equity dilution). This, along with capital raising of INR32.5b via preferential issue to promoters (@INR99.5, 8% equity dilution), completes IDEA’s equity funding of INR67.5b (17% dilution).
- Total equity raising by Vodafone and Idea, along with the tower sale, will reduce the combined entity’s (Vodafone + IDEA) net debt by INR295b to INR811b, thereby reducing net debt-to-EBITDA to 3.9x on FY20E, assuming combined EBITDA of INR210b (including synergy gains).
- Fund-raising should provide Vodafone-Idea with much-needed liquidity to ramp-up network and protect market share against deep-pocketed peers, especially in the current hyper-competitive environment.
- We maintain our Buy rating, with a target price of INR110, at 13x Idea’s Dec-19E EBITDA. Implied EV/EBITDA for the combined entity is 7.4x on FY20E. Our estimated Vodafone-Idea EBITDA margin of 30% (including synergies) for FY20 is still 650bp lower than Bharti’s FY20 estimates.
Idea Cellular provides Global System for Mobile Communications (GSM) based mobile services and related telephony services to individuals and businesses in India. The company operates through three segments: Mobility Services, which provides GSM based mobile and related telephony services; International Long Distance (ILD), which provides international long distance services; and Passive Infrastructure, which provides passive infrastructure services. Co. offers 2G and 3G services that comprise roaming arrangements; ILD and other services; and a range of mobile broadband devices, including dongles and 3G smartphones that provide 3G applications and data services.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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