A battle is brewing between the two major shareholders of Idea Cellular, Axiata Group (formerly Telekom Malaysia) and the Aditya Birla group as a result of the Malaysian company’s unilateral plans to increase its shareholding from 14.99 to 40 per cent by making an open offer.
The Aditya Birla group holds 49 per cent in Idea, the country’s fifth largest mobile service provider with 44 million subscribers.
At a minimum, Axiata plans to increase its stake to 26 per cent, said sources close to the developments, a level that under Indian company law, gives it veto-power over special resolutions.
| AN IDEA OF OWNERSHIP (Major shareholders in Idea Cellular) | |
| Aditya Birla group | 49.13 |
| TMI Mauritius Ltd (Axiata) | 14.99 |
| P S Asia Investment | 10.69 |
| Wagner Ltd | 2.22 |
| Monet Ltd | 2.89 |
| HSBC Global Investment | 1.95 |
| LIC | 2.42 |
| Figures in % | |
The change in shareholding structure hinges on an ongoing merger between Idea and Spice Communications, which was acquired in July 2008. Spice was a joint venture between BK Modi Group's Modi Corp and Telekom Malaysia.
Axiata owns 49 per cent in Spice Communications. After the merger with Idea, the Malaysian company’s stake in Idea Cellular will increase to 20 per cent and the Aditya Birla Group’s will fall to around 45 per cent.
Asked about the development, Axiata’s chief financial officer Dato’yusof Anuar Yacaab said the company did not “respond to comments or rumours that are speculative in nature” as a matter of policy.
He added, however, “Our focus at the moment is to complete the merger between the two entities, Spice and Idea. Once completed, Axiata's stake will rise to about 20 per cent.”
On the shareholder agreement between Axiata and Aditya Birla Group Yacaab said, “The agreement stipulates that we can only increase our shareholding in Idea Cellular with prior consent from the Birla Group.”
A senior Idea Cellular official, however, confirmed that prior approval from the Indian promoters was needed for Axiata to raise its stake under the shareholder agreement. He, however, declined to discuss details.
Sources said it would be difficult for the Indian shareholders to deny Axiata permission. “Such agreements are common between two partners but to deny such a right, the other partner will have to give justifiable reasons,” sources said.
They added that Axiata initially wanted to increase its holding through a preferential issue at Rs 130 to Rs 135 a share, a proposal Idea’s management turned down, saying the company did not need funds.
Meanwhile, in response to a query from Business Standard, Sanjiv Aga, managing director, Idea Cellular, said, “This speculation has no basis.”
Under the takeover rules, an open offer is triggered when any non-promoter increases its stake beyond 15 per cent. In this case, Axiata’s stake increase from 14.99 per cent to 20 per cent will not trigger the takeover code because it takes place by way of a merger. Beyond this, however, any extra open-market purchase will trigger the open offer.
Therefore, instead of buying shares from the open market, Axiata is planning to make a voluntary open offer for 20 per cent.
For the last financial year ending March 2009, Idea reported a net profit of Rs 900 crore on consolidated revenues of Rs 10,148 crore. On Monday, the company's share price closed at Rs 78.85 per share.