Aditya Birla Nuvo

Aditya Birla Nuvo 
Cluster: Apple Green
Recommendation: Buy 
Price target: Rs1,031
Current market price: Rs836

The Idea stake gets bigger
The Aditya Birla group (ABG) has agreed to acquire the Tata group's 48.1% stake in Idea Cellular—through Aditya Birla Nuvo (ABN) and Birla TMT Holdings—for a total consideration of Rs4,406 crore. ABG would acquire 108.9 crore shares of Idea Cellular from the Tata group at Rs40.5 per share, thereby matching the offer of Maxis Communication. The Malaysian company had offered to pick up the Tata stake at Rs40.5 per share. After the acquisition, ABG will own a 98.3% stake in Idea Cellular. This deal pegs the total value or the enterprise value (EV) of Idea Cellular at Rs13,461 crore (including a debt of Rs4,309 crore). The same translates into an EV/subscriber (at the current subscriber base of 0.7 crore as in February 2006) of US$427. The valuation is in line with the recent Hutch-Max India deal concluded at US$429 but is marginally lower than the Aircel-Maxis Communication deal signed at US$485. 

Either by itself and/or through its subsidiaries ABN will acquire 33.9 crore shares representing 15% of the equity capital of Idea Cellular for Rs1,373 crore. After this transaction, the equity holding of ABN and its subsidiaries in Idea Cellular will increase from 20.7% to 35.7%. The transaction will be strictly in agreement with the growth strategy of ABN that seeks to invest in high-growth businesses like those of telecom, information technology (IT) and garments.