Idea IPO likely early next year

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The Aditya Birla group is learnt to be considering the option of an initial public offer to sell part of its stake in its telecom business - Idea Cellular - by early next year, reports The Economic Times.

But the group is also not averse to the idea of a pre-IPO placement to gain from the current interest in the telecom sector, chairman Kumar Mangalam Birla said.

Idea Cellular was originally a JV between the Tatas and the Birlas, before the latter bought out the Tatas' 48% stake for Rs 4,406 crore (Rs 44.06 billion). After the deal with the Tatas, the Birlas indicated that they were looking at selling Aditya Birla Nuvo's stake of 33% in Idea.

"We are talking to other private equity groups including Providence for selling the (Aditya Birla) Nuvo stake, since the due-diligence is on, it'll take some time," Birla said recently.

The Birlas own 98.3% in Idea, with Aditya Birla Nuvo holding 35.7%, Birla TMT Holdings 44.9%, Grasim 7.5%, and Hindalco 10.1%. However, officials indicated that the group is exploring options of an IPO where about 20% of the Birlas' equity can be sold. The move comes on the back of a revival in the capital market and strong prospects for the telecom sector.

According to analysts, a public float would help Idea get money for expansion and increase visibility. "There is healthy appetite for telecom paper in the market because Bharti Airtel and Reliance Communications are the only other major telecom service providers that are listed," said an analyst with a Mumbai-based brokerage. State-owned MTNL , VSNL and Tata Teleservices (Maharashtra) are the other listed companies.

Idea has a net worth of Rs 1,042.92 crore (Rs 10.42 billion), as per a document submitted by the company to the department of telecom, DoT. Going by the valuation of the Tatas' 48.14% stake at Rs 4,406 crore, the total value of the company could be pegged at Rs 9,152 crore (Rs 91.52 billion), or Rs 40.50 per share. Analysts however estimate the valuation to be in the range of Rs 20,000 crore (Rs 200 billion) to Rs 25,000 crore (Rs 250 billion).

Group officials said another supporting reason for an IPO is the scope for growth.