CLSA cuts target price on Idea Cellular post FY17 annual report

CLSA has cut target price on Idea Cellular to Rs 73 from Rs 87 and retailed its sell rating as the FY17 annual report of the telecom company reinforces the stress in the business and hit of high spectrum debt burden.

“Idea’s net debt increased by 26 per cent YoY to Rs 510 billion and gearing is uncomfortable at 5x Ebitda. Idea operations in FY17 were in Rs 4 billion losses (vs Rs 27 billion PAT in FY16) and ROE ( return on equity) and FCF (free cash flow) turned negative. The annual report also shows high contingent liabilities at 66 per cent of net worth and hefty debt repayments over FY18-20,” said CLSA in a note today.

CLSA said it has cut its revenue and EBITDA forecasts for Idea in FY18 and FY19 by 1-7 per cent due to loss of incremental market share.

For the quarter ended March 31, Idea posted a consolidated net loss of Rs 325.6 crore compared with a net profit of Rs 449.2 crore a year ago. Earnings were also hurt by finance cost which rose 15.5 per cent on year.