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IDEA: Company Analysis


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A brief Financial Valuation of IDEA Cellular Limited, providing the valuation multiples and the company background and Competition benchmarking.

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IDEA: Company Analysis

  1. 1. July 3IDEACellularLimited 2011In-depth financial analysis of Idea Cellular Limited, supplemented by Companycompetitive benchmarking against competitors in the market. Report Analyst Name: Rajat Dhar
  2. 2. GSIC Industry: Telecom | Sub Industry: Cellular Telecom |Website: July 3, 2011 [IDEA CELLULAR LIMITED]IDEA CELLULAR LIMITEDKey Stock IndicatorsBloomberg Ticker: IDEA:IN CMP(as on 07 Jul 2011): `81.35 Shares Outstanding(Mn): 3,303.757Face Value/per Share: INR 10.0 52-Week Range: `(82.55-55.65) Beta vs Sensex: 0.847DIV. Yield(%): 2.4 Market Cap (as on 01 Jul’11-[in Mn]) 260,501.200 90-Day Volatility: 28.220 Idea Cellular Limited was incorporated in 1995. The company is among the Key Financial Indicators top five mobile telephony players in India with an 11 per cent all-India (in Mn) Mar-08 Mar-09 Mar-10 rd subscribers market share. Idea is the 3 largest wireless service provider Revenue 67,199.90 99,164.50 1,18,957.70 in India. Idea added 14 out of its total 22 service areas in the past four years. Today it is a pan-India player with commercial operations in all 22 EBITDA 22,712.80 28,165.00 29,262.50 service areas. Idea holds 900MHz spectrum in 9 service areas covering PAT(INR Mn) 10,443.90 10,082.10 10,536.60 ~48% national revenue. Idea holds 16 per cent stake in Indus Towers, a PAT Margins joint venture with other telecom majors Bharti Airtel and Vodafone. Indus (%) 16.59 9.27 8.67 Towers is the worlds largest tower company with over one lakh towers. In EPS (INR/sh.) 3.96 3.01 3.06 2007, Idea was listed on the National Stock Exchange (NSE) and the OPM % 33.8 28.4 24.6 Bombay Stock Exchange (BSE). NPM % 15.54 10.17 8.86 KEY HIGHLIGHTS Source: Idea rings in the ‘Power of 3G’ Share Holding Pattern IDEA Cellular, India’s third largest mobile operator today announced on Indian March 28, the launch of its ‘Gold Standard’ 3G services that will catapult 30.51% 0.58% (Promotor) mobile communication services and transform user experience. The third 38.85% generation of mobile communication systems, 3G, lets customers use an Institution extensive range of high-end data services on a wide variety of handsets and other devices. FII Idea announced the launch of 3G services on its network in MP & 8.35% 15.03% DII Chhattisgarh, Gujarat and Himachal Pradesh. To anchor the occasion, Idea unveiled a new 3G logo. The new branding will be implemented throughout 6.68% India, across all customer touch points Indexed Price Chart Idea Cellular Limited Looking At Options To Monetize Tower Business Outside Of Indus Towers JV-DJ Idea Cellular Limited is looking to monetize the 9,000 telecom towers that 150 30000 25000 it owns outside the Indus Towers Ltd joint venture (JV) and plans to use 100 20000 15000 50 10000 Stock Performances vis-à-vis market 5000 Returns(%) 0 0 1.8.10 1.4.10 1.6.10 1.2.11 1.4.11 1.6.11 1.10.10 1.12.10 YTD 1-m 3-m 12-m Idea Cellular Ltd. 16.57 15.24 22.21 37.23 NIFTY 50 -4.66 5.27 -1.69 14.54 Source: BSE(vol) SENSEX IDEA FinExpertise | Confidential
  3. 3. July 3, 2011 [IDEA CELLULAR LIMITED]the funds to reduce its debt. Plans for monetizing the towers include hiving them off and selling them to atelecom tower operator. (Jones)Idea Cellular Limited Moves TDSAT Against DoT Notice To Cancel Licence-Business Standard Idea Cellular Limited has approached sectoral tribunal TDSAT against a DoT notice to cancel its licence in Punjabfor violating merger and acquisition (M&A) norms. On April 21, the Department of Telecom (DoT) issued showcause notice (SCN) to Idea as to why its licence for the Punjab circle should not be cancelled on violation ofM&A norms. The company has also been slapped with Liquidated Damages (LD) for not rolling out its services asper the norms in the same circle. As per the terms, a licensee is not allowed to merge or amalgamate with anyother company for the first three years. (Standard)Bharti Airtel Limited, Vodafone Essar Ltd. And Idea Cellular Limited Close To Signing 3G Pact-DJBharti Airtel Limited, Vodafone Essar Ltd. and Idea Cellular Limited are close to signing an agreement to sharetheir third-generation radio bandwidth. The agreement, if signed, will allow the companies to bring down theiraverage cost of radio bandwidth by accessing each others networks in areas where they dont own 3G licenses.The three companies had separately said earlier that they were in talks with other 3G license owners for tie-upsto share networks in areas where they didnt hold licenses. (Jones)BACKGROUNDIncorporated as Birla Communications Limited on March 14, 1995 & granted a certificate of commencement ofbusiness on August 11, 1995. With effect from January 1, 2001 following our merger with Tata Cellular Limitedthe joint venture agreement between AT&T Corporation & Grasim Industries Limited dated December 5, 1995was replaced by a shareholders agreement dated December 15, 2000 entered into between Grasim IndustriesLimited on behalf of Aditya Birla Group, Tata Industries Limited on behalf of Tata Group & AT&T WirelessServices Inc. on behalf of AWS Group following which name was changed to Birla Tata AT&T Limited onNovember 6, 2001. Consequent to the introduction of Idea brand, name was changed to Idea Cellular Limitedon May 1, 2002. (Solutions)COMPETITIVE POSITION Peer Comparison Idea Cellular Bharti Airtel Reliance Comm MTNL Revenue 1,53,890.00 3,80,158.00 1,21,297.70 38,412.13 EBITDA 31,280.70 1,30,503.00 9,128.70 -9,615.18 EBITDA margins(%) 20% 34% 8% -25% PAT(INR Mn) 8,446.00 77,169.00 -7,579.90 28,269.53 PAT margin (INR Mn) 5% 20% -6% -74% EPS (INR/sh.) 2.56 20.32 -3.67 -44.87 PE(x) 31.78 19.59 -26.61 -0.99 P/BV (x) 22.76 n.a. n.a. n.a. n.a: Not Available (Mar-11)Source: FinExpertise | Confidential
  4. 4. July 3, 2011 [IDEA CELLULAR LIMITED]FINANCIAL PRO FILE Idea Cellular Bharti Airtel Reliance Comm MTNLLTP 81.35 398.1 97.65 44.352 W H / L 82.55 / 55.65 409.45 / 277.40 195.40 / 74.65 72.75 / 38.00Sales 1,53,890.00 3,80,158.00 1,21,297.70 38,412.10PAT 8,446.00 77,169.00 -7,579.90 -28,269.50Equity 33,032.70 18,988.00 10,320.10 6,300.00OPM (%) 20.33 34.33 7.53 -25.03NPM(%) 5.49 20.3 -6.25 -73.6Source: (Mar-11)Revenue grows at ~31.81% but PAT plummeted by ~6.83%. Top-line grew by at a CAGR of Key Financial Indicators ~31.81% between FY’08 and (in Mn) Mar-08 Mar-09 Mar-10 Mar-11 FY’11. Revenue 67,199.90 99,164.50 1,18,957.70 1,53,890.00 EBITDA 22,712.80 28,165.00 29,262.50 31,280.70 However, EBITDA, in the same PAT(INR Mn) 10,443.90 10,082.10 10,536.60 8,446.00 tenor showed a CAGR of ~11.26%, PAT Margins while EPS, OPM% & NPM% (%) 16.59 9.27 8.67 5% showed a downward trend. EPS (INR/sh.) 3.96 3.01 3.06 2.56 OPM % 33.8 28.4 24.6 20.33 Even after global recovery we can NPM % 15.54 10.17 8.86 5.49 see steady decrease in the PAT Margins(%) from 16.59% in 2008 to 5% in 2011.INDUSTRY PROFILEThe Indian Telecommunications network is the third largest in the world and the second largestamong the emerging economies of Asia. Today, it is the fastest growing market in the world. Thetelecommunication sector continued to register significant success during the year and has emergedas one of the key sectors responsible for India’s resurgent India’s economic growth.It has also undergone a substantial change in terms of mobile versus fixed phones and publicversus private participation. The preference for use of wireless phones has also been predominantin the sector.Participation of the private entities in the telecom sector is rapidly increasing rate there bypresenting the enormous growth opportunities. There is a clear distinction between the GSM andCDMA technologies used.With increasing penetration of the wireless services, the wireline services in the country isbecoming stagnant. On the other hand, Broadband demand has picked up and promises to stabilisefixed line growth. (CCI) FinExpertise | Confidential
  5. 5. July 3, 2011 [IDEA CELLULAR LIMITED]Focus Charts: Movement in Operating & Net Margins EPS (INR/sh.) 40 OPM % NPM % 5 35 4 30 25 3 20 15 2 10 1 5 0 0 Mar-08 Mar-09 Mar-10 Mar-11 Mar-08 Mar-09 Mar-10 Mar-11 0.10 12,000.00 0.05 10,000.00 0.00 8,000.00 Mar-08 Mar-09 Mar-10 Mar-11 -0.05 6,000.00 MANAGEMENT -0.10 Name Designation 4,000.00 -0.15 Himanshu Kapania Managing Director Sanjeev Aga Director 2,000.00 Company Secretary & Compliance -0.20 Pankaj Kapdeo Officer -0.25 PAT(INR Mn) 0.00 PAT growth (y-o-y) Ambrish Jain Deputy Chief Executive Officer Shareholding Pattern (%) Mar-11 Dec-10 Sep-10 Jun-10 Mar-10 Promoter and Promoter Group 46.04% 46.96% 46.97% 46.98% 46.99% FII 9.90% 9.70% 7.58% 6.05% 7.40% DII 7.91% 6.99% 7.76% 7.71% 7.52% Non Institutions 36.15% 36.35% 37.69% 39.26% 38.09%Source: FinExpertise | Confidential
  6. 6. July 3, 2011 [IDEA CELLULAR LIMITED]BibliographyCCI. Corporate Catalyst India. 8 July 2011. <>. <>.Jones, Dow. Reuters. 27 June 2011. <>.Solutions, Dion Global. Money Control. 8 July 2011 <>.Standard, Business. Reuters. 29 April 2011. <>. For more copies or other information, contact Institutional/Retail: Rajat Dhar Phone: + (91) 999760359 E-mail: FinExpertise, 3rd Floor, Malviya Nagar, New Delhi 110 017.DisclaimerThis report is based on data publicly available or from sources considered reliable. Analyst does not represent that it is accurate or complete and hence, itshould not be relied upon as such. The data / report is subject to change without any prior notice. Opinions expressed herein are analyst’s current opinionsas on the date of this report. Nothing in this report constitutes investment, legal, accounting or tax advice or any solicitation, whatsoever. The subscriber /user assume the entire risk of any use made of this data / report. CRISIL especially states that, it has no financial liability whatsoever, to the subscribers /users of this report. This report is for the personal information only of the authorised recipient in India only. This report should not be reproduced orredistributed or communicated directly or indirectly in any form to any other person – especially outside India or published or copied in whole or in part, forany purpose. Analyst is not responsible for any errors and especially states that it has no financial liability whatsoever to the subscribers / users /transmitters / distributors of this report.For information please contact FinExpertise at +91-9999760359, or via FinExpertise | Confidential