Birla’s Idea Plans to Raise $1 Billion as Founders Boost Holding

(Bloomberg) -- Billionaire Kumar Mangalam Birla's Idea Cellular Ltd. plans to raise more than $1 billion to strengthen its war chest as competition in the world's second-largest telecom market intensifies.

The company, which is poised to merge with Vodafone Group Plc's India unit to form the nation's biggest wireless carrier, will raise 32.5 billion rupees ($513 million) by selling shares to its founders, according to exchange filings. It has named a panel to consider raising an additional 35 billion rupees of capital through various routes, including an institutional placement, Idea said.

India's mobile operators have seen revenue plummet and debt soar amid a price war that intensified after Mukesh Ambani, the country's richest man, stormed into the market in 2016 offering free calls and data with Reliance Jio Infocomm Ltd. That's forced consolidation as profit dropped at the biggest carriers, while the smaller ones were pushed out of business.

“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.

To read more on Birla's outlook on the telecom sector, click here

Idea will issue up to 326.6 million shares at 99.50 rupees a piece to founder entities Birla TMT Holdings, Elaine Investments, Oriana Investments and Surya Kiran Investments on a preferential basis, it said in the filing. The transaction is expected to be completed by early February and will take the founders' stake in Idea to as much as 47.2 percent from 42.4 percent, it said.

Due to the change in Idea's shareholding, the Aditya Birla Group has agreed to purchase a minimum 2.5 percent of the Vodafone India-Idea merged entity from the U.K. carrier, Vodafone said separately. The purchase should give the Indian conglomerate at least 26 percent of the combined company, with Vodafone holding about 47.5 percent at completion, it said.

The merger will probably be completed in the first half of 2018, Vodafone said.

Idea's proposed capital raising along with the sale of its standalone towers to American Tower Corp. and the potential monetization of its stake in Indus Towers Ltd., will augment the company's long-term capital resources, it said.

To contact the reporter on this story: Nupur Acharya in Mumbai at nacharya7@bloomberg.net.

To contact the editors responsible for this story: Divya Balji at dbalji1@bloomberg.net, Candice Zachariahs, Young-Sam Cho

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