Idea-Vodafone merger dips Idea stocks by 15%

As soon as Idea Cellular announced news of forthcoming merger with Vodafone India and Vodafone Mobile Services (VMSL), its stocks dipped by 15%.

The deal has put Idea's implied enterprise value at $10.8 billion, as against the $12.40 billion valuation for Vodafone India.

After the stock fell 14.73%, it stood at Rs 92 on BSE. Earlier, it had risen 14.68% in the early trade and hit a high of Rs 123.75.

Also read: Airtel, Vodafone and Idea are facing the heat from Jio as they may lose upper-end customers

In its filing to BSE, Idea had said that after the deal, its promoters will hold a 26% stake in the resultant entity, while Vodafone will hold 45.10% after its promoters would transfer a 4.9% stake to Idea promoters for Rs 3,874 crore in cash. Rest of the stock would be for the public.

Also read: Reliance Jio will be unfazed by Vodafone-Idea merger. Here’s why

"We expect the combine entity will have about 40 per cent revenue share. In the process of integration and combining the two big operations, they might lose some revenue market share to Jio or to other incumbents. We estimate about $11-12 billion revenue and Ebitda margins of 28-30 per cent, once these firms combine their operations." Nitin Soni of Fitch Ratings told ET.

Idea also announced that it would issue equity shares to Vodafone India after the scheme of amalgamation with VMSL. This would be equal to 47% of the post-issue paid-up capital of the company on a fully-diluted basis.

The company also said that after the merger, shares issued to Vodafone India in pursuant of the merger of VMSL with the company would stand cancelled.

(Image source: Forbes)