Providence Equity to sell 3.47% stake in Idea Cellular

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Private equity firm Providence Equity Partners has decided to sell almost half of its stake in telecom operator Idea Cellular Ltd in a block trade for about $209 million (about Rs.1,400 crore), said two people aware of the development.

“Providence has put around 3.47% stake on sale. The book was launched on Thursday evening and the trade is expected to be closed on Friday,” said the first person mentioned above on condition of anonymity.

The fund has hired investment banker Morgan Stanley to manage the share sale, the person added.

As of 31 March, the fund held around 6.8% stake in the telecom company, according to data from stock exchanges.

The share sale is happening at a price range of Rs.110.5-112.5 per share, a discount of almost 6% to the closing price of Rs.118.5 per share on Thursday, said the second person cited above.

At this price range, the share sale will fetch the fund anywhere between Rs.1,380 crore to Rs.1,400 crore, the person added.

An email sent to Idea Cellular Ltd did not elicit a response.

A text message sent to Biswajit Subramanian, managing director at Providence Equity Partners, went unanswered.

In 2006, before Idea’s public offer, the fund picked up close to 15% for almost $400 million in the firm through institutional placement.

In May 2008, Providence invested another $640 million in Aditya Birla Group-controlled telecom unit Aditya Birla Telecom Ltd, or ABTL. A wholly-owned subsidiary of Idea Cellular Ltd, ABTL was then India’s sixth largest mobile phone services operator by customers.

Providence’s shareholding in Idea fell as the company’s equity base grew through subsequent equity capital raising.

After a 2.3% stake sale that earned it Rs.1,414 crore via an open market transaction in September 2014, Providence’s shareholding in Idea was reduced to 6.8%.

Providence’s other investments in India include STAR CJ Network India Pvt. Ltd, a home shopping venture.

Idea Cellular, the third largest mobile phone operator by subscribers, saw its March quarter profit drop by 38.8% due to higher financing and spectrum fees of its 4G network.

Net profit fell to Rs.575.60 crore in the three months ended 31 March from Rs.941.77 crore in the year-ago period. Total revenue rose 12.6% to Rs.9,480 crore.

Shares of Idea Cellular Ltd gained 0.85% to Rs.118.35 on Thursday on BSE, while the exchange’s benchmark Sensex gained 0.48% to 26,843.14 points.