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Idea share price




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Idea share price-The company has a net debt of Rs 10,219.9 crore and its net debt to EBIDTA stands at 1.39x. The funds may also be used for renewal of telecom licence ..

Is it time to dial >The company has a net debt of Rs 10,219.9 crore and its net debt to EBIDTA stands at 1.39x. The funds may also be used for renewal of telecom licence in 2015-16. Updated: October 10, 2013, 13:41 IST

ET Bureau

NEW DELHI: After rallying over 70 per cent so far in 2013 and over 100 per cent over the past one year, most analysts are sceptical of a further rally in the telecom operator given high debt levels and pressure on net margins.

Idea Cellular touched an all-time high second day in a row on reports that the telecom major may announce a QIP of Rs 3,000 crore as early as next week. It has already got board and shareholders’ approval for the same.

According to sources, the pricing of the QIP is likely to be at Rs 190-195 per share. Citigroup and Axis Capital are bankers to the issue. The funds will be used by the company to repay debt and to meet capex requirements.

The company has a net debt of Rs 10,219.9 crore and its net debt to EBIDTA stands at 1.39x. The funds may also be used for renewal of telecom licence in 2015-16.

The stock surged little over 1 per cent to touch its fresh all time high of Rs 184.80 on Thursday. It has hit a low of Rs 182 in trade today.

Idea Cellular is a pure play on India’s tariff growth story and we expect it to generate continuous gains in revenue market share; however, we are of the view that the stock price may have limited upside potential because of equity placement, HSBC global research said in a note.

Margins are likely to come under pressure as we expect that net interest costs of Rs 9.5 bn in FY14, at an effective cost of financing of 10.6%. For FY15, we expect the effective cost of financing of 11.5%.

Although HSBC has raised its target price marginally to Rs 190 from Rs 175 earlier but they remain ‘neutral’ on the stock. Our higher target price is driven by an 8% increase in EBITDA estimates for FY14e and 15 per cent in FY15e.

According to analysts, most of the telecom operators such as Bharti Airtel, Reliance Communications and Idea Cellular are likely to have had a tough second quarter, with modest sequential revenue per minute growth, a decline in call traffic and fall in average revenue per minute, say analysts.

The weaker numbers in the July-September period come after a strong first quarter signaled an improvement in operating fundamentals, with the return of pricing power.

Brokerage Morgan Stanley expects “Idea’s revenues to decline the most” sequentially among listed telecom companies during the quarter, pegging the fall at 3.1% sequentially to Rs 6,336.4 crore, with net profit likely down 6% at Rs 434.6 crore.

The brokerage predicts a 4% decline in Idea’s call traffic, which “would be higher than its peers as it had been the highest gainer in traffic market share in the last few quarters”.

Book profits or stay invested?

Analysts are of the view that given the fact that the stock has already run-up quite a bit so far in the year 2013, investors should remain invested as stock has the potential to move higher once short term headwinds abate.

However, they say it is not the right time to enter the stock at this point as Idea Cellular is already trading near its higher end of the range. However, they recommend switching to Bharti Airtel.

“I would bet on Bharti Airtel because despite the fact that there are several news reports coming on the regulatory part, in terms of the business model and in terms of the kind of market share Bharti definitely would benefit hopefully if ARPUs stabilise,” said Avinnash Gorakssakar, Head of Research, Miintdirect.com in an interview with ET Now.

The strong rupee depreciation against the US dollar is likely to translate into benefits for Bharti Airtel which has a large foreign operation in Africa and its dollar revenues get converted in Indian rupees.

“From a short-term trend the stock may remain volatile, but from a medium to longer term perspective Bharti Airtel definitely a better bet,” he added.

The story of Idea Cellular remain challenging on debt burdens that will definitely pose some overhang on the stock; but clearly the company has a decent cash flow so it is not going to be so bad compared to other players, say analysts.

Gorakssakar is of the view that in the near-term may be in the next few quarters we could see margins at the net level being under pressure because of the higher interest cost.

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Idea share price

SOURCE: http://telecom.economictimes.indiatimes.com/news/corporate/industry/is-it-time-to-dial-idea-cellular/23888828


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