US fund may buy a third of Idea

Providence deal size may be over Rs 3,000 cr.

US-based Providence Equity Partners, which manages funds worth over $9 billion, is close to acquiring a 33 per cent stake in Idea Cellular.

Investment banking sources said the deal might be valued at over Rs 3,000 crore, going by the price at which the Aditya Birla group bought out the Tatas from the cellular company in April. It might be sealed within a month, they added.

The Birla group had announced in April the acquisition of the Tata group's 48.14 per cent stake in Idea Cellular for Rs 4,406 crore, valuing the company at Rs 9,151 crore. This translated into a per share acquisition cost of Rs 41.05.

Idea has 6 million customers in 11 circles, with Rs 3,500 crore of debt and Rs 2,259 crore of equity capital.

When contacted, an Idea executive declined to comment.

If the deal goes through, it will mark Providence's entry into the country. The private equity fund, which has investments in 100 information technology, media, and entertainment companies in 20 countries, had made an abortive attempt to enter India through the acquisition of C Sivasankaran's stake in Aircel last year.

The list of companies that Providence has invested in includes names like AT&T Canada, American Cellular Corp, Hallmark International, Digiturk (Turkey's largest provider of pay television services), Kabel Deutschland (Europe's largest cable operator), and the Warner Music Group.

According to industry sources, a bunch of private equity players, including Blackstone, were also in the fray for Idea.

The deal with Providence could act as a benchmark for Idea Cellular's pricing in its initial public offering, which is expected at the beginning of next year.

After the sale, the Birla group's holding will come down to 65.3 per cent from the existing 98.3 per cent. C Sivasankaran holds a 1.7 per cent stake in the company.