Billionaire Birla Said to Delay Idea Share Sale: Corporate IndiaGeorge Smith Alexander and Bhuma Shrivastava
Billionaire Kumar Mangalam Birla’s Idea Cellular Ltd. delayed a stock sale as it awaits clarity on Indian spectrum licenses, said a person with knowledge of the decision.
India’s No. 2 mobile-phone operator may start the sale to institutions to raise as much as 30 billion rupees ($481 million) next year after originally aiming to complete it this month, according to two people. They asked not to be identified because the deliberations are private. Idea aimed to sell shares for least 190 rupees each, one of the people said.
Mobile-phone providers are balking at an Indian government panel’s proposal to peg the cost of the most widely used airwaves above that recommended by the industry regulator. Bharti Airtel Ltd., India’s biggest wireless carrier, faces risks as the cost of renewing airwave licenses increases amid an “erratic” policy environment, Moody’s said this month.
Idea “could be waiting for clarity on all these spectrum-related issues,” said Harit Shah, an analyst with Nirmal Bang Institutional Equities in Mumbai who has a buy rating on the stock. “They would look at financing only to fortify their balance sheet and for the spectrum renewal.”
A panel in India’s telecommunications ministry has recommended an increase of as much as 25 percent for airwaves to be sold in January over prices advised by industry supervisor Telecom Regulatory Authority of India in September. The proposal needs to be approved by a group of ministers.
Idea announced plans in August to raise money through a share sale to institutional investors. The company will also sell as much as 7.5 billion rupees of stock to an existing shareholder, Malaysia’s Axiata Group Bhd., it said at the time.
“We have time for one year,” Managing Director Himanshu Kapania said on an earnings conference call Oct. 25, referring to the share sale. “We’re closely watching the situation and we will evaluate the overall scenario and then take a call” on the timing and the size of the sale, he said then.
Idea fell 0.9 percent to 174.30 rupees at the close in Mumbai trading. The stock has surged 68 percent this year, compared with a 6.2 percent advance by the benchmark S&P BSE India Sensex and Bharti’s 8.6 percent gain.
Idea’s board had approved the share sale to fund spectrum acquisition, said Urmil Shah, a Mumbai-based analyst at Kim Eng Securities Ltd. “There is still some uncertainty over the auction front. They are likely waiting for clarity on the price and timing of the auction.” He rates Idea shares buy.
India’s telecommunications regulator in September recommended lowering reserve prices for the nation’s airwaves after an auction in March drew just one bidder.
Idea has to prepare starting in 2014 for the renewal of some licenses that expire in late 2015, Kapania told investors on the conference call last month. The company also doesn’t currently have airwaves to offer third-generation wireless services in half the country, he said at the time, signaling it may need to spend for the spectrum.
There is no pressing need for Idea to raise money since it has good cash flows, said Nirmal Bang’s Shah.
Cash flow from operations almost doubled to 53.7 billion rupees in the year ended March, according to data compiled by Bloomberg. The Mumbai-based company had net debt of 129 billion rupees as of March 31, the data show.
Bank of America Corp., Citigroup Inc., Morgan Stanley, Standard Chartered Plc, JPMorgan Chase & Co. and Axis Bank Ltd. will manage the share sale, the people familiar said.
Rajat Mukarji, a spokesman for Idea, declined to comment yesterday on the share sale.
Indian companies have raised 405 billion rupees through domestic equity and equity linked offerings in 78 transactions so far this year, according to data compiled by Bloomberg. In 2012, a total of 578 billion rupees was raised in 70 transactions.