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IDEACELLULAR LTD

IDEA An Overview
Type Public BSE: 532822 NSE: IDEA Telecommunications 1995 Santacruz East, Mumbai, India Kumar Mangalam Birla (Chairman) Mobile telephony, Wireless Internet service 15,389.00 crore (US$3.43 billion) (2011) 2,879.33 crore (US$642.09 million) (2011) 844.60 crore (US$188.35 million) (2011) US$5.334 billion (2010) 6,481 (2010) Aditya Birla Group (49.05%) Axiata Group Berhad (15%) Providence Equity (10.6%) ideacellular.com

Industry Founded Headquarters Key people

Products Revenue Operating income Net income Total assets Employees Parent

Website

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Management - Idea Cellular
Name

IDEACELLULAR LTD

Designation

Kumar Mangalam Birla Rajashree Birla Biswajit A Subramanian Sanjeev Aga Gian Prakash Gupta Tarjani Vakil P Murari Himanshu Kapania Rakesh Jain Juan Villalonga Navarro Arun Thiagarajan Mohan Gyani R C Bhargava Shridhir Sariputta Hansa Wijayasuriya

Chairman / Chair Person Non Executive Director Non Executive Director Non Executive Director Independent Director Independent Director Independent Director Managing Director Non Executive Director Non Executive Director Independent Director Independent Director Independent Director Alternate Director

Network:

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IDEACELLULAR LTD

Idea Cellular ltd is a pan india 2G service provider, which has all 22 licenses under a single leagal entity. It is Third largest wireless operator in Indian telecom sector. It is among the top 10 operators who is using more than 1bn minutes use of network per day. It is winner of 3G spectrum in 11 service areas.

3G Auction Winner its Counts

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IDEACELLULAR LTD

Idea is winner in 11 service areas and it is covering approximately 50% of total revenue of india. 3G services covering approximately 80% of ideas revenue. All 8 service areas (900MHZ),where idea is #1/2/3 are covered. Idea has paid Rs 57.69bn,& which is lowest among major operators. Intra-circle roaming arrangement to provide further opportunity.

3G Foot Print

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IDEACELLULAR LTD

Idea launched 3G services in 9 service areas,out of 11 service areas where it won 3G spectrum. Currently there are around 7000 3G sites in these service areas. Idea have launched 3G services under roaming arrangements for the service areas of mumbai,bihar,karnataka,rajasthan,west engal,delhi,kolkata,tamil nadu(inclu.chennai),assam and north east. With these arrangements idea currrently offers 3G services in 19 service areas. It has committed to offer 3G services in 3000 towns by end of this financial year.

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IDEACELLULAR LTD

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SWOT Analysis

IDEA a Power Brand

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IDEACELLULAR LTD

Financial Statement Analysis

SEGMETAL REVENUE- BREAKUP

2008-2009

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IDEACELLULAR LTD

Service revenue is 101169.13 mn Sale of trading goods is 143.72mn Other income is divided into 2 parts (Liabilities and miscellaneous expenses receivables) which are 160.31 mn and 70.63 mn

2009-2010

Service revenue is 123650.40 mn Sale of trading goods is 329.43 mn Other income is 941mn and 70.03mn

2010-2011 Service revenue is 153965.51mn Sale of trading goods is 418.47mn Other income is 558mn and 89.45mn So from above we can conclude that the Majority of the revenue for Idea Cellular Ltd is from Service revenue.

From the above chart we can conclude that Net sales is increasing and Growth of sales is decreasing. The CAGR for the Net sales is 37.13%.

For the year 2008 and 2009 the sales is decreasing so Pat is also decreasing. Due to that, there is a decrease in PAT Margin but as soon as Sales increases PAT and PAT Margin also increases so we can conlude that the major effect on PAT is due to increase OR DECREASE IN Sales.

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IDEACELLULAR LTD

DUPONT ANALYSIS YEAR Sales PAT Total Assets Share Fund Holders 2007 4366.4 493.92 8085.2 2 2179.7 8 11.31% 0.54 3.71 6.11% 22.66% 2008 6719.9 9 1004.0 9 11106. 6 3540.8 4 14.94% 0.61 3.14 9.04% 28.36% 2009 10131.2 9 664.45 24185.7 9 13265.3 1 6.56% 0.42 1.82 2.75% 5.01% 2010 12397.8 8 895.87 22967.3 7 11372.3 6 7.23% 0.54 2.02 3.90% 7.88% 2011 15438.4 916.64 26566.8 1 12299.9 4 5.94% 0.58 2.16 3.45% 7.45%

Profit Margin Asset Turnover Financial Leverage ROA ROE

KEY TRENDS

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Peer Comparison

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IDEACELLULAR LTD

Financial Valuation
We have valued Idea Cellular Ltd using Discounted Cash Flow (DCF) Methodology given fairly stable outlook for its sales and expenditure projections. Using this method we arrived at a target price of Rs 124 giving an upside of ~ 28.49% from the current levels. Profit & Loss have been projected for a period of 10 years.

Key Assumptions Sale Growth Assumptions

Top line growth Assumptions for remaining years of 10 years DCF

Year 2012 to 2014

Growth Rate 25%

Reasons As idea is winner of 9 telecom sector for 3G in india, therefore there is increase in sales. As 3G technology declines, due to 3G providing at cheapest rate. Now the user for 3G is

2015 to 2019

18%

2020

12%

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2021 2022 6% 6%

IDEACELLULAR LTD
declining. Stable growth rate.

Sales growth is expected to grow at the growth rate Terminal growth is expected to be at 6% Other income is expected to be 1.2% of latest % of sales Stock adjustment is expected to be 6.77% of latest % of sales Raw material is expected to be 0.3% of latest % of sales Power & fuel cost is expected to be 9.4% of latest % of sales Employee cost is expected to be 5.3% average % of sales Other manufacturing Expenses is 45% of latest plus 3G spectrum fee % of sales Selling & administration expenses is expected to be 12% of latest % of sales Miscellaneous expenses is 0.9% of latest % of sales Depreciation is 14.8% of average % of sales Capex is increasing at 25% of % of sales for 2012-2014 then at 20% of % of sales for 2015-2019, 17% for 2020 and thereafter at 12% forever. Working capital is increasing at -14% of % of sales for 2012-2014 then at -12% for 2015-2019, -9% for 2020 and thereafter at -6% forever.

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Tax rate is assumed 33%. Interest remain constatant.

IDEACELLULAR LTD

Particulars Beta 10 Year Sec Risk Premium Cost Equity

Values 0.603 G- 7.50% 5.50% Of 11.12% 4.34%

7.05% 7.74% 7.85% 7.95% 8.06%

Cost Of Debt WACC

Relative Valuation

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