CLSA upgrades Idea Cellular shares to ‘buy’

MUMBAI: CLSA has upgraded the shares of Idea Cellular to ‘buy’ from ‘sell’ and raised target price on it to Rs 130 from Rs 77.

The brokerage said Idea-Vodafone could see deleveraging of $5 billion led by capital infusions and sale of tower assets in the run up to their merger, which is also likely to close early.


“With expected revival in long-term growth, we lift our target price to Rs130 based on 8.5x FY21 Ebitda of merged entity and discounting back to Dec-18, and we upgrade from SELL to BUY,” said CLSA.

CLSA has cut its FY18-20 estimates for Idea by 2-32 per cent to factor in recent tariff cuts.

Idea’s merger with Vodafone is now likely to close in first half of 2018.

“Merger is crucial for Idea and Vodafone to address inadequacy in data spectrum vs Bharti Airtel and Reliance Jio. On merger, Idea-Vodafone could begin integrating spectrum and network which in turn could drive early synergies,” said CLSA.

“Synergies worth Rs 17 billion could be realised immediately as Idea Vodafone convert their overlapping sites from tenancy to loading,” it added.