Idea Cellular Ltd, part of the Aditya Birla Group,plans to raise as much as Rs2,125 crore ($479 million) in its first stock sale.
The shares will be sold within the price band of Rs65 to Rs75 each from 12 to 15 February. Idea also announced that one of the issue’s managers, JM Morgan, would support the stock in the market after it is listed. Called market stabilisation, this essentially means the manager buys stock in the secondary market to support its price.
Idea Cellular also said it placed a Rs375 crore stake at the top end of the price range with some company founders, directors and high networth individuals. Significantly, the list of these individuals includes Manoj Kohli, the president of Bharti Airtel, India’s largest mobile telephony company.
He picked up 26,666 shares of Idea at Rs75 a share. It also included T. V. Ramachandran, the head of the cellular operators association of India, an industry lobby. He acquired 21,333 shares, again at Rs75 each.
Idea’s initial offering aims to tap increased interest from investors in India, the world’s fastest growing cellular market, as Vodafone Group Plc., Orascom Telecom Holding SAE and Reliance Communications prepare bids to acquire Hutchison Essar Ltd, India’s fourth-largest operator. Idea has 8% share of a market where less than one in seven people own a cellphone.
“It is fairly priced,” Sushil Sharma, an analyst at Batlivala & Karani Securities in Mumbai, said in an interview today. “They aren’t present in all of (India’s telecom zones),” he added.
Idea plans to invest as much as $2 billion by 31March 2008, to extend its network to India’s commercial hub of Mumbai as well as another nine of India’s 23 designated zones, or circles.
India’s success in almost doubling the number of new mobile-phone subscribers added since 1 April from a year earlier has helped make the two largest cellular operators among the best-performing stocks in the country.
Shares of Bharti Airtel Ltd, India’s biggest wireless operator, gained 82% last year, making it the fourth-best performer among the 30 stocks in India’s benchmark Sensitive Index.
Reliance Communications Ltd has advanced 52% since it began trading 6 March, beating the 33% gain in the Sensex.
Idea “could have raised much more” because of the “crazy” levels of interest among investors in the Indian wireless sector, Sharma said on Monday. The per-subscriber valuations for Bharti have remained almost constant over the past four years while average revenues per-user declined, he said. Sharma rates Bharti as “buy.”
Idea plans to keep aside shares worth Rs50 crore of the proposed public offering for employees. It also has an option to allot shares worth an additional Rs319 crore should the IPO receive a better-than-expected response from investors.
India overtook China in monthly subscriber additions in the second half of last year, and gained 6.48 million new mobile- phone users in December for a total of 149.5 million, according to the Telecom Regulatory Authority of India.