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Idea’s Rs3,000 crore QIP signals better sentiment in stock market

LiveMint logoLiveMint 05-06-2014 P.R. Sanjai

Idea Cellular Ltd, an Aditya Birla Group company, will raise `3,000 crore by selling shares to institutional investors, also called Qualified Institutional Placement (QIP), about a year after its board approved the plan. Firms waiting to raise funds are taking advantage of prevailing upbeat mood in the stock markets since the new government took charge.

India’s third largest wireless service operator informed the BSE about the share sale, which was cleared by its board on 1 August. The shares will be priced between `131 and `136.35, a 0-3.92% discount to its closing price on BSE on Thursday, people close to the development said, requesting anonymity. Details of subscription, names of investors and the final price were not available.

The company declined to comment.

Idea Cellular had earlier said it would invest up to `3,500 crore this fiscal year to build its network and launch third-generation (3G) telecom services in Delhi next year.

Idea Cellular shares gained 0.41% to close at `136.35 on Thursday on BSE, while the benchmark Sensex gained 0.86% to 25,019.51 points. The announcement came after trading ended.

“The Idea Cellular issue will get a robust response from investors as there is a lot of pent-up appetite. Also, pricing is reasonable and indicates that promoters have started laying more emphasis on getting the capital at the right price instead of raising money at a premium,” said Samir Bahl, head of investment banking at Anand Rathi Financial Services Ltd, a brokerage.

Bahl expects other equity issues in the pipeline to be reasonably priced as well, given that economic conditions in India remain sluggish.

Several companies are in the queue to raise funds from the equity markets, riding on the improved sentiments following the election victory of the Bharatiya Janata Party (BJP), which is perceived as business-friendly, Mint reported on 20 May.

The rush to sell shares to institutional investors could be a precursor to a revival in the moribund initial public offering (IPO) market, say investment bankers.

Risk appetite among the wealthy, financial institutions and banks is shifting to riskier investments from safer instruments such as fixed income options, gold products and real estate, in anticipation of a pick-up in the economy, they said, declining to be named.

Separately, Yes Bank said on Thursday it had approved the allotment of 53.5 million shares to raise `2,942 crore. “The allotment of shares was done across 114 investors at `550 per share. The issue was oversubscribed over five times, generating an aggregate worldwide demand of $2.5 billion,” the private lender said.

The rush to raise equity capital comes in the backdrop of rising debt levels at Indian companies. In a report dated 28 April, the International Monetary Fund said that a third of the corporate debt in India is on the books of companies with a debt-to-equity ratio of more than three, the highest degree of leverage in the Asia-Pacific region.

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