Investors worldwide literally have stampeded to buy into the initial public offering (IPO) of India's Idea Cellular. The initial reports indicated that the issue is 42 times oversubscribed. That means that the shares will go to market at the high end of the offering bracket, or rs 75 per share. The company planed to mop up funds aggregating Rs 2,125 crore, excluding a green shoe option of Rs 318.75 crore from this IPO.
The oversubscribtion has given rise to possibilities that the shares immediately will surge by 20 percent or more when they start trading. That's in part based on so-called "grey market" trading in the shares even before the IPO closed, a common practice in Indian share market.
Idea, which has about 12 million subscribers, submitted a "draft red herring prospectus" (DRHP) with the Securities and Exchange Board of India (SEBI) two months ago What everyone is watching now is how the Aditya Birla group, which retains a controlling 65.2-percent equity share in Idea, performs in its plans to build up the carrier. Aditya has said it will use the IPO proceeds to fund expansion plans, including construction of a long-distance network.
Idea first rolled out its network in 1995 in the Indian states of Maharashtra and Gujarat. Since then, it has grown both by bidding for licenses and through buying smaller competitors Escorts and Escotel. Its footprint currently covers nearly 60 percent of India's potential subscriber base, geographically encompassing a vast area with 1,353 towns and cities. That's scheduled to grow to 70 percent within six-to-nine months as the company enters the Bihar and Mumbai markets.
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