Idea Cellular seeks higher valuation at Rs 134/share as Vodafone merger talks enter last lap

Telecommunication major Idea Cellular has reportedly sought higher valuation for its equity at above Rs 134 per share in the proposed merger with Vodafone India, even as the negotiation between the two to unite their businesses are close to finalisation, CNBC TV18 reported on Thursday citing unidentified sources. The price sought by Idea is at about 19% premium to its Wednesday’s closing price of Rs 112.9.

Idea is reportedly insisting on valuing its equity at base price of Rs 134 per share for further negotiations, since it was the price at which it last issues shares in a qualified institutional placement in 2014, CNBC TV18 reported. The company is seeking to ensure that the institutional investors, who put in money at the time, earn returns on their investments, the news report said.

As is widely known, India’s second-largest telecommunication services provider Vodafone and the third-largest operator Idea Cellular are in talks for an all-share merger, amid the ongoing consolidation in the Indian telecom industry reeling under the pressure of intense competition from Reliance Jio’s free service offers.

Both the companies entered into merger negotiations seeking equal partnership in the combined entity. Vodafone’s UK parent and Idea Cellular’s parent Aditya Birla group may hold equal stakes at 37% each in the proposed merged entity, with the public holding the remaining 26% stake, according to the news reports.

However, given that Idea Cellular’s valuation is at a steep discount to Vodafone India’s estimated Rs 50,000 crore, Aditya Birla Group might need to pump in sizeable equity capital to bring the group’s equity share at par with the UK company. Any change in the valuation of the current equity will impact the money required to be brought in by Aditya Birla Group.

Indian Oil Corporation