Idea plans to infuse Rs 200 crore into Escotel

Idea Cellular is planning to infuse around Rs 200 crore of fresh equity into the debt-ridden Escotel Mobile Communications - the Nanda and First Pacific-controlled wireless telephony company - it acquired in January this year.

The company is also working on a plan with Escotel's consortium of lenders to restructure the company's Rs 890 crore debt.

"We are working on a revival package for Escotel, which includes debt restructuring. There is a requirement of up to Rs 200 crore to bring down its debt-equity ratio to 1:1," Idea Cellular Vikram CEO Mehmi said.

Earlier this year, Idea Cellular bought 100 per cent of Escorts in Escotel Mobile and Escorts Telecommunications for an enterprise value of around Rs 1,150 crore.

This included Rs 300 crore by way of cash (Rs 275 crore as cash component and another Rs 75 crore as promoters' debt, which can be recovered) and the remaining Rs 850 crore in accumulated debt.

Sources close to the company said Escotel's capital requirement to run day-to-day operations and "clear old debts" stood at about Rs 200 crore. They said to finance the fund infusion into Escotel, Idea Cellular might borrow up to Rs 100 crore and dip into its own pockets for the rest.

The Escotel acquisition, the largest in the domestic wireless industry, has catapulted Idea's subscriber base from 2.4 million to over 3 million. This will take its share of the GSM market to nearly 15 per cent from 10 per cent now.

Escotel operates in six circles, including Uttar Pradesh (west), Uttar Pradesh (east), Rajasthan, Himachal Pradesh, Haryana and Kerala with more than 825,000 subscribers. It is expected to close this financial year with a revenue of Rs 350 crore.

Idea Cellular has chalked out a capital expenditure plan of Rs 1,700 crore for the next three years. Its revenue for the financial year ended March 2004 is expected to be Rs 1,300-1,400 crore.

The company plans to file its initial public offering prospectus with the market regulator later this month.