Idea Cellular reported quarterly results that were largely in line with estimates. Consolidated net sales were 1.7% higher than expected at Rs. 86,765.8 million, driven by higher value-added services revenue. Consolidated EBITDA of Rs. 30,526.3 million and reported PAT of Rs. 7,873.3 million also met estimates. However, key operating metrics like voice revenue, minutes of usage, and data ARPU declined sequentially, leading to a 5.3% quarter-on-quarter drop in EBITDA and 13.1% fall in reported PAT. The brokerage maintains a "Buy" rating on Idea Cellular.

1. Idea Cellular Ltd.
Telecom
Q2 FY16 First Cut
BUY
Rajnath Yadav | Board line: +91 22 6707 9444; Ext. 975 | rajnath.yadav@choiceindia.com
1
Oct. 21, 2015
Idea Cellular Ltd. (Idea) reported Q2 FY16 numbers, which came in-line with our expectation. The company reported a
consolidated net sales of Rs. 86,765.8mn as against our expectation of Rs. 85,337.2mn. Better than expected net sales was
mainly due to higher VAS revenue. Consolidated EBITDA stood at Rs. 30,526.3mn with margin of 35.2%. Reported PAT also
came in line with our estimates and stood at Rs. 7,873.3mn.
Source: Choice Broking Research
Q2 FY16 Result Snapshot:
Particular (Rs. mn) Q2 FY16 Actual Q2 FY16 Estimates Variance (%) Reason / Comments
Net Sales 86,765.8 85,337.2 1.7% Top-line came in-line with our estimates.
EBITDA 30,570.3 30,526.3 0.1% EBITDA in-line with our estimates.
Reported PAT 8,092.6 7,873.3 2.8% Reported PAT in-line with our estimates.
Particulars (Rs. mn) Q2 FY16 Q1 FY16 Q2 FY15 Q-o-Q (%) Y-o-Y (%)
Total Operating Income 86,890.6 87,983.5 75,699.2 -1.2% 14.8%
Total Operating Expenditure (56,320.3) (55,699.7) (50,792.2) 1.1% 10.9%
EBITDA 30,570.3 32,283.8 24,907.0 -5.3% 22.7%
Depreciation (15,380.6) (15,159.0) (11,787.8) 1.5% 30.5%
EBIT 15,189.7 17,124.8 13,119.2 -11.3% 15.8%
Interest Expenses (3,062.8) (4,016.3) (2,610.4) -23.7% 17.3%
Other Income 336.6 1,224.3 1,165.6 -72.5% -71.1%
Profit Before Tax (PBT) 12,463.5 14,332.8 11,674.4 -13.0% 6.8%
Tax Expenses (4,370.9) (5,024.5) (4,115.6) -13.0% 6.2%
Reported PAT 8,092.6 9,308.3 7,558.8 -13.1% 7.1%
Basic EPS (Rs.) 2.3 2.6 2.1 -13.1% 6.6%
Diluted EPS (Rs.) 2.2 2.6 2.1 -13.2% 6.7%
EBITDA Margin (%) 35.2% 36.7% 32.9% (151) bps 228 bps
Reported PAT Margin (%) 9.3% 10.6% 10.0% (127) bps (67) bps
Source: Choice Broking Research

2. Idea Cellular Ltd.
Telecom
Q2 FY16 First Cut
BUY
Rajnath Yadav | Board line: +91 22 6707 9444; Ext. 975 | rajnath.yadav@choiceindia.com
2
Oct. 21, 2015
Source: Choice Broking Research
• On the back of a sluggish quarter, Idea reported a 1.2% Q-o-Q decline in the consolidated top-line to Rs. 86,890.6mn. On
a Y-o-Y basis, it increased by 14.8%.
• Lower minutes of usage in the network and almost flat voice average revenue per minute (ARPM) led to a 3.8% Q-o-Q
decline in voice revenue to Rs. 61,950.8mn. Total minutes on the network declined by 3.2% sequentially to 189.5bn
minutes, whereas, ARPM declined by 0.6% Q-o-Q to 32.7 paisa. Revenue contribution from VAS business increased by
180bps Q-o-Q and stood at 27.9% of the Mobility segment revenue. Data business reported 9.3% Q-o-Q rise in the sales,
largely on the back of 14.9% Q-o-Q increase in data consumption. Blended data average revenue per MB (ARMB) declined
by 4.9% Q-o-Q. Consequently, the revenue from the Mobility segment (inclusive of voice and VAS business), declined by
1.8% Q-o-Q to Rs. 85,087.2mn, however on Y-o-Y basis it increased by 14%.
• Business from the International long distance and Passive infrastructure segments grew by 23.3% and 1.1% Q-o-Q,
respectively, in Q2 FY16.
• Sequentially, total operating expenditure increased by 1.1% resulting to a 5.3% decline in consolidated EBITDA to Rs.
30,570.3mn. EBITDA margin contracted by 151bps Q-o-Q to 35.2%.
• Depreciation charge increased by 15% Q-o-Q, while interest expenses declined by 23.7%. This coupled with lower other
income led to a 13.1% Q-o-Q fall in reported PAT to Rs. 8,092.6mn. PAT margin contracted by 127bps to 9.3%.
• At the end of Q2 FY16, cash and cash balance stood at Rs. 774mn as compared to Rs. 557mn in Q1 FY16. Net-debt stood
at Rs. 207,873mn, while net-debt to TTM EBITDA stood at 1.7x as compared to 1.4x by the end of Q1 FY16.
• Currently we have a “BUY” recommendation on the stock with a target price of Rs. 240 per share. However, we will
review the same post detailed analysis of the Q2 FY16 result.
Segmental Breakup:
Q2 FY16 Result Analysis:
Q2 FY16 Q1 FY16 Q2 FY15 Q-o-Q (%) Y-o-Y (%)
Segmental Revenue (Rs. mn)
Mobility 85,087.2 86,603.5 74,621.3 -1.8% 14.0%
International Long Distance 2,329.9 1,890.0 1,523.8 23.3% 52.9%
Passive Infrastructure 6,924.3 6,848.5 6,529.7 1.1% 6.0%
Inter Segment Eliminations (7,575.6) (7,394.9) (7,016.7) 2.4% 8.0%
Total Consolidated Revenue 86,765.8 87,947.1 75,658.1 -1.3% 14.7%
Segmental EBIT Break-up (Rs. mn)
Mobility 12,831.3 15,205.5 11,321.6 -15.6% 13.3%
International Long Distance 433.7 110.4 216.5 292.8% 100.3%
Passive Infrastructure 1,924.7 1,808.9 1,581.1 6.4% 21.7%
Total Consolidated EBIT 15,189.7 17,124.8 13,119.2 -11.3% 15.8%
Segmental EBIT Margin (%)
Mobility 15.1% 17.6% 15.2% (248) Bps (9) Bps
International Long Distance 18.6% 5.8% 14.2% 1,277 bps 441 bps
Passive Infrastructure 27.8% 26.4% 24.2% 138 bps 358 bps

3. es
3
Disclaimer
This is solely for information of clients of Choice Broking and does not construe to be an investment advice. It is also not intended as an offer or solicitation
for the purchase and sale of any financial instruments. Any action taken by you on the basis of the information contained herein is your responsibility alone
and Choice Broking its subsidiaries or its employees or associates will not be liable in any manner for the consequences of such action taken by you. We have
exercised due diligence in checking the correctness and authenticity of the information contained in this recommendation, but Choice Broking or any of its
subsidiaries or associates or employees shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in
the information contained in this recommendation or any action taken on basis of this information. This report is based on the fundamental analysis with a
view to forecast future price. The Research analysts for this report certifies that all of the views expressed in this report accurately reflect his or her personal
views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly
related to specific recommendations or views expressed in this report. Choice Broking has based this document on information obtained from sources it
believes to be reliable but which it has not independently verified; Choice Broking makes no guarantee, representation or warranty and accepts no
responsibility or liability as to its accuracy or completeness. The opinions contained within the report are based upon publicly available information at the
time of publication and are subject to change without notice. The information and any disclosures provided herein are in summary form and have been
prepared for informational purposes. The recommendations and suggested price levels are intended purely for stock market investment purposes. The
recommendations are valid for the day of the report and will remain valid till the target period. The information and any disclosures provided herein may be
considered confidential. Any use, distribution, modification, copying, forwarding or disclosure by any person is strictly prohibited. The information and any
disclosures provided herein do not constitute a solicitation or offer to purchase or sell any security or other financial product or instrument. The current
performance may be unaudited. Past performance does not guarantee future returns. There can be no assurance that investments will achieve any targeted
rates of return, and there is no guarantee against the loss of your entire investment.
POTENTIAL CONFLICT OF INTEREST DISCLOSURE (as on date of report) Disclosure of interest statement – • Analyst interest of the stock /Instrument(s): - No. •
Firm interest of the stock / Instrument (s): - No.
Choice’s Rating Rationale
The price target for a large cap stock represents the value the analyst expects the stock to reach over next 12 months. For a
stock to be classified as Outperform, the expected return must exceed the local risk free return by at least 5% over the next
12 months. For a stock to be classified as Underperform, the stock return must be below the local risk free return by at least
5% over the next 12 months. Stocks between these bands are classified as Neutral.
Choice Equity Broking Pvt. Ltd.
Choice House, Shree Shakambhari Corporate Park, Plt No: -156-158,
J.B. Nagar, Andheri (East), Mumbai - 400 099.
+91-022-6707 9999
+91-022-6707 9959
www.choiceindia.com
Q2 FY16 First Cut
Idea Cellular Ltd.
Date Recommendation CMP (Rs.) Target Price (Rs.)
27-Jul-2015 BUY 179 240
30-Apr-2015 BUY 175 240
13-Apr-2015 BUY 196 240
Rating Legend
Rating Upside
BUY Absolute Return >15%
Accumulate Absolute Return Between 10-15%
Hold Absolute Return Between 0-10%
Reduce Absolute Return 0 To Negative 10%
Sell Absolute Return > Negative 10%
Institutional Equity Team
Name Designation Email id Contact No.
Ajay Kejriwal President ajay@choiceindia.com 022- 6707 9850
Sumeet Bagadia Head of Research sumeet.bagadia@choiceindia.com 022 - 6707 9830
Amit Singh VP - Institutional Sales amit.singh@choiceindia.com 022 - 6707 9852
Devendra Gaikwad Sr. Manager - Institutional Sales devendra.gaikwad@choiceindia.com 022 - 6707 9877
Rajnath Yadav Research Analyst rajnath.yadav@choiceindia.com 022 - 6707 9975
Satish Kumar Research Analyst satish.kumar@choiceindia.com 022 - 6707 9974
Kunal Parmar Research Associate kunal.parmar@choiceindia.com 022 - 6707 9982
Ritesh Patel Research Associate ritesh.patel@choiceindia.com 022 - 6707 9978
Amit Pathania Research Associate amit.pathania@choiceindia.com 022 - 6707 9979
Vikas Chaudhari Research Associate vikas.chaudhari@choiceindia.com 022 - 6707 9988
Trirashmi Ghoderao Research Advisor trirashmi.ghoderao@choiceindia.com 022 - 6707 9972
Neeraj Yadav Research Advisor Neeraj.yadav@choiceindia.com 022 - 6707 9988