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Mar 20, 2017 02:18 PM IST |

Working the Numbers: How much will Vodafone-Idea combined entity be valued at?

Going by the deal value of Rs 3874 crore for the 4.9 percent stake from Vodafone to Idea, the combined entity will have market capitalisation of Rs 79,061 crore.

Working the Numbers: How much will Vodafone-Idea combined entity be valued at?
Madhuchanda Dey

Moneycontrol Research

Idea Cellular and Vodafone India -- along with its subsidiary Vodafone Mobile Services -- have announced a merger whereby Vodafone group will initially assume 50 percent ownership of the combined entity and eventually transfer 4.9 percent stake to Idea promoters at pre-determined value of Rs 3,874 crore. After this transfer, the two promoters Vodafone and Idea will hold 45.1 percent and 26 percent respectively of the new entity.

We attempted doing some quick math on the post issue shareholding structure and valuation on the basis of the valuation of the 4.9% tranche.

Let us first look at the shareholding of Idea pre-merger. The promoter group Aditya Birla owns 152.9 crore shares through 6 entities, thereby controlling 42.5% of the company. The public owns the remaining 207.2 crore shares. With a total issued shares of 360 crore, at the current market price of Rs 99.8, the market capitalisation of the listed Idea cellular works out to Rs 35,944 crore.

Sanjit

If we delve into the contours of the deal:

Post-merger, the erstwhile promoters of Idea will initially have 21.1% stake – 152.9 crore shares of the Aditya Birla Group will be 21.1% of the consolidated entity. Hence, the issued shares of the consolidated entity will be 724.58 crore shares.

The other important data point is the agreed upon valuation of Rs 3,874 crore for 4.9 percent stake that Vodafone will transfer to Idea promoters. Given that the outstanding equity of the combined entity is 724.5 crore shares, this means Idea promoters will pay Rs 3,874 crore for 35.5 crore shares - that works to Rs 109 per share.

At this valuation what is the implied market cap of the new entity?

Sanjit1

As the exhibit suggests, the erstwhile promoter Aditya Birla will have 26 percent stake valued at Rs 20,556 crore, the dominant promoter Vodafone will have 45.4 percent stake valued at Rs 35,897 crore and the public shareholding will be at 28.6 percent. Going by the deal value of Rs 3874 crore for the 4.9 percent stake from Vodafone to Idea, the combined entity will have market capitalisation of Rs 79,061 crore.
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