Idea Cellular plans to raise $1b

Indian operator Idea Cellular said Thursday that its board has approved plans to raise up to 67.5 billion rupees ($1.06 billion) in the sale of new shares, in a bid to strengthen its capital position ahead of completing its planned merger with Vodafone India.

The company, which is poised to merge with Vodafone’s India unit to create the country’s biggest mobile carrier, will raise 32.5 billion rupees by selling shares to its controlling shareholder the Aditya Birla Group (ABG) and raise the remaining 35 billion rupees by selling shares to institutional investors or a rights issue, the company said.

As a result, ABG will buy a minimum of 2.5% of the merged entity from Vodafone, or such higher stake as required in order for ABG to ultimately own at least 26% of the merged entity.

The purchase of the 2.5% interest by ABG follows the increase in its ownership in Idea to 47% from 42%, as a result of a fundraising by the Indian carrier.

Under the original merger agreement, ABG is expected to reach a shareholding of 26% in the merged entity.

Vodafone will receive minimum proceeds of 19.6 billion rupees from such sale and its ownership in the combined entity is expected to be approximately 47.5% at the completion of the merger.

The companies said such changes to the capital structure were already contemplated in the scheme of arrangement for the merger. Vodafone’s stake in the combined entity in excess of 45.1% will not be subject to any lock-up.

The merger of Vodafone India with Idea Cellular — the country’s second and third-largest mobile operators, respectively–was announced in March 2017. The proposed deal has already been approved by shareholders and creditors and the Competition Commission of India, but still needs clearance from the Department of Telecom and the National Company Law Tribunal.

The companies expect to complete the merger in the first half of calendar 2018.