Providence, Citi to buy 20% in Idea

Providence Equity Partners and the Citi group are set to pick up a combined 20 per cent stake in the Aditya Birla group telecom company, Idea Cellular, for Rs 2,485 crore.

The investors are expected to pay Rs 55 per share. The pricing is substantially higher than Rs 40.50, the rate at which the Birla group bought Tatas' share in the company in April.

Sources said Providence had earlier aimed at taking a one-third stake in the company but had now decided to settle for less. Citi is a late entrant into the deal.

When contacted, an Idea executive declined to comment. The deal, once it materialises, will put the valuation of the company at Rs 12,425 crore and will also mark the entry of Providence Equity Partners, which manages funds worth over $9 billion, into India.

The Birla group had announced in April the acquisition of Tatas' 48.14 per cent stake in Idea Cellular for Rs 4,406 crore, valuing the company at Rs 9,151 crore.

Idea has 10 million customers in nine circles with Rs 3,500 crore of debt and Rs 2,259 crore of equity capital. 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 1.7 per cent in the company.

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

Povidence has investments in 100 information technology, media, and entertainment companies in 20 countries. It had made an abortive attempt to enter India through the acquisition of C Sivasankaran's stake in Aircel last year.