RESULTS REVIEW 1QFY19 01 AUG 2018

Idea Cellular BUY

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters

Hope pins on merger synergiesIdea’s 1QFY19operating performance was weak led by 6.6mn subscriber loss, flat data subscribers and modest 1mn broadband subscriber additions. This we believe is owing to focus on impending merger.

Idea’s high leverage (Rs 1.1tn for merged entity; ~14-15x net debt/exit EBITDA) constraints it from being aggressive in the market place by steeping up capex. This may necessitate equity infusion.

Delivery of guided synergy benefits from the merger and likely industry repair can lead to enhanced EBITDA and thus improvement in leverage ratio. Merger with Vodafone would provide the wherewithal to combat competition by expanding broadband footprint (~80-85% of population). These are potential near-term re-rating triggers. Reiterate BUY with TP of Rs 70 (9x EV/E plus synergies).

Key highlights

1QFY19 highlights: Sequentially, revenue declined by 4% to Rs 58.9bn (adjusted ~2.9%). Adjusted EBITDA was down 35% QoQto Rs 6.5bn due to higher

network costs owing to increase in diesel prices and sale of standalone towers.

Idea (and Vodafone) had been matching Bharti on operating performance since Jio launch barring 1QFY19. In our view, under-investment in networks (constrained by balance sheet) and muted response to unsustainable market pricing have started to reflect in weak subscriber and data growth.

Concall takeaways: (1) Management reiterated its synergy guidance of $10bn NPV, annual Rs 140bn from fourth year of merged operations including 60% from opex (2) Broadband coverage gap with leaders to be bridged in 2-3 quarters led by spectrum integration and redeployment of equipment’s at overlapping locations (3) Tariff increase is inevitable as current tariffs are unsustainable (4) 70% of merged entity’s spectrum to be deployed for 4G (5) Co has paid Rs 33.3bn in cash and bank guarantee of Rs 39.2bn under protest for one time spectrum charges to avoid further delay in merger (6) Rationalized S&D spend on new acquisitions, reflecting in weak trends.

Near-term outlook is tough owing to severe EBITDA erosion (and high leverage), if the tariff war prolongs.

Consolidated Financial Summary (excluding Vodafone) (Rs bn) 1QFY19 1QFY18 YoY (%) 4QFY18 QoQ (%) FY17 FY18 FY19E FY20E FY21E Net Sales 58.9 81.7 (27.9) 61.4 (4.0) 355.8 282.8 227.7 246.3 258.5 EBITDA 6.6 18.8 (64.8) 14.5 (54.4) 102.0 60.5 16.1 38.9 74.5 APAT (17.8) (8.1) 119.0 (9.6) 85.5 (4.0) (41.7) (76.3) (61.8) (42.4) Diluted EPS (Rs) (5.0) (2.3) 119.0 (2.7) 85.5 (1.1) (11.6) (21.2) (17.2) (11.8) P/E (x) (49.5) (4.8) (2.6) (3.2) (4.7) EV / EBITDA (x) 7.3 13.0 47.4 20.6 10.9 RoE (%) (1.6) (16.0) (28.0) (25.6) (22.4) Source: Company, HDFC sec Inst Research

INDUSTRY TELECOM

CMP (as on 31 Jul 2018) Rs 55

Target Price Rs 70 Nifty 11,357

Sensex 37,607

KEY STOCK DATA

Bloomberg IDEA IN

No. of Shares (mn) 4,360

MCap (Rs bn) / ($ mn) 239/3,492

6m avg traded value (Rs mn) 1,199

STOCK PERFORMANCE (%)

52 Week high / low Rs 119/48

3M 6M 12M

Absolute (%) (20.7) (39.9) (40.7)

Relative (%) (27.6) (44.7) (56.2)

SHAREHOLDING PATTERN (%)

Promoters 42.6

FIs & Local MFs 11.9

FPIs 26.0

Public & Others 19.5 Source : BSE

Himanshu Shah himanshu.shah@hdfcsec.com +91-22-6171-7315

IDEA CELLULAR : RESULTS REVIEW 1QFY19

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Quarterly Financial Snapshot: Consolidated Rs Mn 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 % chg YoY % chg QoQ Revenue 81,665 74,655 65,096 61,373 58,892 -27.9% -4.0% Acess costs 10,690 11,198 6,361 7,109 7,744 -27.6% 8.9% License Fee 8,666 7,689 6,985 5,327 5,961 -31.2% 11.9% Network & IT costs 26,883 25,361 23,661 21,429 26,427 -1.7% 23.3% Employee costs 4,195 4,398 4,242 2,595 3,920 -6.6% 51.1% Sales & Marketing 10,017 8,854 9,052 8,167 6,236 -37.7% -23.6% Other Expenses 2,460 2,139 2,561 2,275 2,010 -18.3% -11.6% Operating Expenses 62,911 59,639 52,862 46,902 52,298 -16.9% 11.5% EBITDA 18,754 15,016 12,234 14,471 6,594 -64.8% -54.4% D&A 20,679 21,143 21,415 20,854 20,924 1.2% 0.3% Other Income 152 454 420 2,504 1,414 830.3% -43.5% Finance Costs 11,691 12,283 11,910 12,246 15,258 30.5% 24.6% PBT before share in JV (13,464) (17,956) (20,671) (16,125) (28,174) 109.3% 74.7% Share of Profit in JV 818 843 818 745 598 -26.9% -19.7% PBT after share in JV (12,646) (17,113) (19,853) (15,380) (27,576) 118.1% 79.3% Tax (4,497) (6,047) (7,009) (5,758) (9,731) 116.4% 69.0% EO Inc/(loss) and OCI (10) (12) (11) 316 20,480 NA NA PAT (8,159) (11,078) (12,855) (9,306) 2,635 -132.3% -128.3% Source: Company, HDFC sec Inst Research Margin Analysis (%)

1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 chg bps YoY chg bps QoQ Access costs 13.1 15.0 9.8 11.6 13.1 76 6 License Fee 10.6 10.3 10.7 8.7 10.1 (148) (49) Network & IT costs 32.9 34.0 36.3 34.9 44.9 1,670 1,196 Employee costs 5.1 5.9 6.5 4.2 6.7 151 152 Sales & Marketing 12.3 11.9 13.9 13.3 10.6 111 (168) Other Expenses 3.0 2.9 3.9 3.7 3.4 74 40 Operating Expenses 77.0 79.9 81.2 76.4 88.8 1,934 1,177 EBITDA 23.0 20.1 18.8 23.6 11.2 (1,934) (1,177) D&A 25.3 28.3 32.9 34.0 35.5 1,452 1,021 Finance Costs 0.2 0.6 0.6 4.1 2.4 101 221 PAT 14.3 16.5 18.3 20.0 25.9 1,511 1,159 Tax as % of PBT (16.5) (24.1) (31.8) (26.3) (47.8) (4,795) (3,135) LF as % of NR 1.0 1.1 1.3 1.2 1.0 (12) 1 Source: Company, HDFC sec Inst Research

Adjusted for standalone tower sales and full impact of IUC rate cut on international incoming calls (vs. two months in 4QFY18), revenue has declined by ~2.9% QoQ 4QFY18 included one off expense reversals of Rs 4.5bn viz. Network Rs 2bn, Employee Rs 1.4bn and LF Rs 1.1bn Increase in network costs QoQ adjusted for one offs owing to sale of standalone towers and increase in diesel costs Extraordinary income includes sale of Standalone towers for Rs 41bn and gain of Rs 20bn

IDEA CELLULAR : RESULTS REVIEW 1QFY19

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Peer comparison: Key operating and financial parameters Parameter Operator 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 % chg YoY % chgQoQ Closing Subs (Mn) Bharti 259.9 265.9 273.6 280.6 282.0 290.1 304.2 344.6 22.8 13.3 Idea 178.8 185.2 189.5 189.0 182.4 188.5 194.5 187.9 (0.6) (3.4) Voda 200.7 204.7 209.1 211.9 207.4 212.5 222.7 219.7 3.7 (1.3) Jio 16.0 72.2 108.7 123.4 138.6 160.1 186.6 215.3 74.5 15.4 Total 655.4 727.9 780.9 804.9 810.5 851.2 908.0 967.5 20.2 6.6

Closing Subs Mkt Share (%)

Bharti 39.7 36.5 35.0 34.9 34.8 34.1 33.5 35.6 75 bps 211 bps Idea 27.3 25.4 24.3 23.5 22.5 22.1 21.4 19.4 -406 bps -200 bps Voda 30.6 28.1 26.8 26.3 25.6 25.0 24.5 22.7 -362 bps -181 bps Jio 2.4 9.9 13.9 15.3 17.1 18.8 20.6 22.3 693 bps 170 bps

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Net Adds (Mn)

Bharti 4.2 5.9 7.8 7.0 1.4 8.1 14.1 40.4 Idea 2.6 6.4 4.3 (0.5) (6.6) 6.1 6.0 (6.6) Voda 1.3 4.0 4.4 2.9 (4.5) 5.1 10.2 (3.0) Jio 16.0 56.2 36.5 14.7 15.2 21.5 26.5 28.7

Total 24.1 72.5 53.0 24.1 5.5 40.8 56.7 59.5 ARPU (Rs)

Bharti 188 172 158 154 145 123 116 105 (31.8) (8.8) Idea 173 157 142 141 132 114 105 100 (29.1) (4.8) Voda 171 158 142 141 132 114 105 102 (27.6) (3.3) Jio 156 154 137 135 - (1.9)

Data Subs (Mn) Bharti 62.7 54.9 57.4 62.6 65.8 70.8 86.1 94.8 51.5 10.1 Idea 54.1 48.6 42.2 38.1 38.2 42.6 46.8 46.5 22.1 (0.6) Voda 69.6 65.0 66.9 69.2 67.7 69.9 76.0 77.0 11.3 1.3 Jio 16.0 72.2 108.7 123.4 138.6 160.1 186.6 215.3 74.5 15.4 Total 202.3 240.7 275.2 293.2 310.2 343.4 395.5 433.6 Data Subs Mkt Share (%)

Bharti 31.0 22.8 20.8 21.3 21.2 20.6 21.8 21.9 52 bps 9 bps Idea 26.7 20.2 15.3 13.0 12.3 12.4 11.8 10.7 -227 bps -110 bps Voda 34.4 27.0 24.3 23.6 21.8 20.4 19.2 17.8 -584 bps -146 bps Jio 7.9 30.0 39.5 42.1 44.7 46.6 47.2 49.7 758 bps 247 bps

Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0 Data Subs Net Adds (Mn)*

Bharti 3.8 (7.7) 2.4 5.2 3.2 5.1 15.2 8.7 Idea 5.0 (5.5) (6.4) (4.1) 0.1 4.4 4.2 (0.3) Voda (0.1) (4.6) 1.9 2.3 (1.5) 2.2 6.1 1.0 Jio 16.0 56.2 36.5 14.7 15.2 21.5 26.5 28.7

Total 24.6 38.4 34.5 18.1 17.0 33.2 52.0 38.1

Steep decline in ARPU of incumbents led by (a) downtrading/churn of high ARPU customers owing to shift to unlimited bundled plans and (b) IUC rate cut on domestic calls from 14p/min to 6p/min and (c) IUC rate cut on international incoming calls from 53p/min to 30p/min Jio with its ubiquitous 4G only network is highly successful in moving the market from voice to data and remains a dominant market leader Adoption of bundled plans from end Oct17 helped Idea regain the subscriber momentum

IDEA CELLULAR : RESULTS REVIEW 1QFY19

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Parameter Operator 2QFY17 3QFY17 4QFY17 1QFY18 2QFY18 3QFY18 4QFY18 1QFY19 % chg YoY % chgQoQ

Data Usage (Mn MBs)

Bharti 178 172 225 472 784 1,106 1,540 2,151 355.3 39.7 Idea 107 109 127 253 439 571 818 1,018 302.8 24.5 Voda 110 105 129 238 384 567 808 1,059 345.3 31.1 Jio - - - - 3,780 4,310 5,060 6,420 - 26.9 Total 396 386 482 963 5,386 6,555 8,226 10,648 1,005.7 29.4

Data Usage Mkt Share (%)

Bharti 45.0 44.5 46.7 49.1 14.6 16.9 18.7 20.2 Idea 27.1 28.2 26.4 26.3 8.1 8.7 9.9 9.6 Voda 27.9 27.3 26.9 24.7 7.1 8.7 9.8 9.9 Jio - - - - 70.2 65.8 61.5 60.3 Total 100.0 100.0 100.0 100.0 100.0 100.0 100.0 100.0

Data Usage/Sub (MBs/mth)

Bharti 977 974 1,337 2,626 4,072 5,397 6,543 7,927 201.9 21.2 Idea 695 707 932 2,098 3,832 4,714 6,100 7,273 246.7 19.2 Voda 528 522 654 1,165 1,869 2,749 3,691 4,615 296.1 25.0 Jio - - - - 9,620 9,620 9,730 10,649 - 9.5

MOUs (Bn Mins) Bharti 313 330 381 422 437 495 593 684 62.2 15.4 Idea 196 210 231 251 255 283 330 350 39.4 5.8 Voda 184 189 211 - - - - - - - Jio - - - - 246 311 372 449 - 20.6

693 729 823 673 938 1,088 1,295 1,482 120.4 14.4 MOUs/Sub (Mins) Bharti 406 419 471 507 518 575 670 700 38.0 4.5 Idea 368 385 412 441 459 509 577 609 38.1 5.5 Voda 306 311 339 - - - - - - Jio 626 695 716 744 - 4.0 Source: Companny, HDFC Sec Inst research * Idea changed its data subscriber definition from 1QFY18 to minimum monthly usage of 15MB/month

Incumbents are showing healthy growth in data usage (except 1QFY19 by Voda/Idea). This is mildly positive as are able to engage consumers. However, with virtual unlimited plans (1.5GB/day for nominal Rs 125/month including taxes), data subscriber growth is more important along-with usage. Jio scores significantly above incumbents over here.

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Key Assumptions (Pro-forma financials of Idea and Vodafone)

FY16 FY17 FY18 FY19E FY20E FY21E Subs (Mn) 373 399 417 439 464 485 - Idea 175 190 195 203 215 225 - Voda 198 209 223 236 249 260

ARPU (Rs)* 178 161 120 94 97 97 - Idea 178 161 120 93 96 95 - Voda 177 160 120 95 98 99

Revenue (Rs bn) 803 785 632 523 567 598 - Idea 359 356 283 228 246 259 - Voda 443 430 349 295 321 340

EBITDA (Rs bn) 249 218 136 39 89 155 - Idea 120 102 60 16 39 75 - Voda 129 116 75 23 50 81

EBITDA Margin (%) 31.0 27.8 21.5 7.5 15.6 25.9 - Idea 33.3 28.7 21.4 7.1 15.8 28.8 - Voda 29.2 27.1 21.6 7.9 15.5 23.7

Net Debt (Rs bn) 361 501 1,124 1,072 1,146 1,146 - Idea 361 501 549 524 561 576 - Voda 574 549 586 570

Multiple (X) 9.0 9.0 9.0 9.0 9.0 9.0 Enterprise Value (Rs bn) 2,240 1,965 1,224 353 797 1,396 - Idea 1,077 918 544 145 350 671 - Voda 1,163 1,047 679 209 448 725

Equity Value*(Rs bn) 1,880 1,464 100 (719) (349) 250 - Idea 716 417 (5) (379) (211) 95 - Voda 1,163 1,047 105 (340) (138) 155

* Our ARPU is net of IUC rate cut impact in FY18 (effective1-Oct) from 14p to 6p per minute and nil from 1-Jan - 2020 Idea’s high leverage and sliding EBITDA puts near term pressure on the performance This is despite equity infusion of (Rs 67.5bn) and stake sale in standalone towers (Rs 78.5bn) and proposed 11% stake sale in Indus (~Rs 60bn)

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FY16 FY17 FY18E FY19E FY20E FY21E Equity Value(Rs bn) - One time tower exit penalty - - - (60) (60) (60) - Merger synergies** - - - 453 672 759

O/s shares 7.2 7.2 8.7 8.7 8.7 8.7 - Idea 3.6 3.6 4.4 4.4 4.4 4.4 - Voda 3.6 3.6 4.4 4.4 4.4 4.4

Value per share* (without merger) 261 203 12 (82) (40) 29 - Idea 199 116 (1) (87) (48) 22 - Voda 323 291 24 (78) (32) 36

Value per share (with merger) 261 203 12 (37) 30 109 - One time tower exit penalty - - - (7) (7) (7) - Merger synergies** - - - 52 77 87 Source: Company, HDFC sec Inst Research; * includes standalone tower sale of Voda-Idea, stake sale in Indus and equity infusion of Rs 67.5bn

in Idea and similar amount by Voda **refer table below calculation on merger synergies

Our SoTP for Idea is Rs 70 based on avg of FY20-21 TP including merger synergies Exit penalty is calculated on 60k towers @ Rs 1mn per tower

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Idea-Vodafone synergy benefits from merger

FY16 FY17 FY18E FY19E FY20E FY21E FY22E Operating Cost* 333 367 345 338 331 339 356 - Idea 152 170 158 155 153 152 158 - Voda 181 197 187 183 178 187 198

Synergy % 7.5% 15.0% 17.5% 20.0% - Idea 7.5% 15.0% 17.5% 20.0% - Voda 7.5% 15.0% 17.5% 20.0% Synergy benefit p.a. (Rs bn) 50 75 84 96 - Idea 12 23 27 32 - Voda 14 27 33 40 - Capex synergies 25 25 25 25 Synergy value (Rs bn) @ 9x 453 672 759 866 - Idea 104 207 240 284 - Voda 124 240 295 357 - Capex 225 225 225 225 * Operating costs includes Network, Employees, Sales and marketing &General and Administration costs

Change in estimates Idea Cellular + Vodafone (including synergies)

Old New Change (%)

FY19 FY20 FY19 FY20 FY19 FY20 Subs (Mn) 440.0 461.0 439.1 464.3 (0.2) 0.7 ARPU (Rs) 103.0 109.0 94.3 97.0 (8.4) (11.0) Revenue (Rs Bn) 550.8 613.8 523.0 567.2 (5.1) (7.6) EBITDA (Rs Bn) 90.0 163.0 64.6 138.3 (28.2) (15.1) EBITDA margin (%) 16.3 26.6 12.4 24.4 (24.4) (8.2) Source: HDFC sec Inst Research

Peer Set Comparison

COMPANY Mcap

(Rs bn)

CMP (Rs) RECO TP

(Rs)

EPS (Rs/sh) EV/EBITDA (x) RoE (%)

FY18 FY19E FY20E FY21E FY18 FY19E FY20E FY21E FY18 FY19E FY20E FY21E

Bharti Airtel 1,560 390 BUY 455 4.7 (3.1) 2.1 7.2 8.7 9.8 8.1 6.9 1.6 nmf 1.3 4.4 Idea Cellular 239 55 BUY 70 (11.6) (21.2) (17.2) (11.8) 13.0 47.4 20.6 10.9 nmf nmf nmf nmf Bharti Infratel 529 286 NEU 306 13.8 13.9 15.2 16.7 7.8 8.2 7.7 7.2 15.7 15.4 17.0 18.6 Source: Company, HDFC sec Inst Research

We estimate the synergy benefit to kick-in from FY19 on opex costs Idea and Vodafone incur capex of Rs 150-170bn p.a. We estimate the synergies on capex at Rs 25bn p.a. Idea and Vodafone estimate the synergy benefit at Rs 140bn p.a. after fourth year of operations with ~60% of synergies towards operating costs (i.e. Rs 85bn)

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Consolidated Income Statement (excluding Vodafone) (Rs bn) FY17 FY18 FY19E FY20E FY21E Net Sales 355.8 282.8 227.7 246.3 258.5 Growth (%) (1.0) (20.5) (19.5) 8.2 5.0 Access Costs 42.8 35.4 33.5 27.5 - Net revenue 313.0 247.4 194.2 218.8 258.5 Growth (%) 0.1 (20.9) (21.5) 12.7 18.1 License fee 40.5 28.7 23.5 26.8 31.7 LF as % of NR 12.9 11.6 12.1 12.3 12.3 Network & IT costs 105.5 97.3 105.7 102.1 98.0 Employee costs 18.0 15.4 15.2 15.3 16.3 SG&A 36.0 36.1 25.5 27.1 28.7 Other Operating Expenses 11.0 9.4 8.2 8.7 9.3 Operating Expenditure 170.5 158.3 154.7 153.2 152.3 EBITDA 102.0 60.5 16.1 38.9 74.5 EBITDA (%) 28.7 21.4 7.1 15.8 28.8 EBITDA Growth (%) (14.8) (40.7) (73.4) 141.4 91.9 Depreciation 78.3 84.1 85.2 89.2 93.2 EBIT 23.7 (23.6) (69.1) (50.3) (18.6) Other Income 3.1 3.5 5.9 6.5 7.2 Interest 39.6 48.1 53.4 48.4 51.9 Share in Profit of JV 4.2 3.2 1.8 - - PBT (8.6) (65.0) (114.8) (92.3) (63.4) Tax (4.6) (23.3) (38.5) (30.5) (20.9) APAT (4.0) (41.7) (76.3) (61.8) (42.4) APAT Growth (%) (114.7) 942.8 83.0 (18.9) (31.4) EPS (1.1) (11.6) (21.2) (17.2) (11.8) EPS Growth (%) (114.7) 942.8 83.0 (18.9) (31.4)

Source: Company, HDFC sec Inst Research

Consolidated Balance Sheet (Rs bn) FY17 FY18 FY19E FY20E FY21E SOURCES OF FUNDS Share Capital - Equity 36.1 43.6 43.6 43.6 43.6 Reserves 211.3 229.0 229.2 167.4 124.9 Total Shareholders’ Funds 247.3 272.6 272.8 211.0 168.5 Long term debt 550.2 595.5 633.6 646.4 633.5 Short term debt 0.3 10.4 17.8 22.7 27.6 Total Debt 550.5 605.9 651.4 669.1 661.1 Other non-current liabilities 32.7 9.4 16.5 20.1 24.4 TOTAL SOURCES OF FUNDS 830.6 887.9 940.8 900.1 854.1 APPLICATION OF FUNDS Net Block 843.0 832.8 810.7 791.5 768.3 Other non-current assets 47.7 50.7 75.5 81.7 88.5 Total Non-current Assets 890.7 883.4 886.2 873.2 856.8 Inventories 0.6 0.4 0.4 0.4 0.4 Debtors 13.1 8.9 8.8 9.5 10.3 Cash & Equivalents 49.8 56.6 127.9 108.4 85.2 Other Current Assets 12.8 36.5 21.5 16.9 14.1 Total Current Assets 76.3 102.3 158.6 135.2 110.0 Total Current Liabilities 136.4 97.9 104.0 108.3 112.7 Net Current Assets (60.1) 4.5 54.6 26.9 (2.7) TOTAL APPLICATION OF FUNDS 830.6 887.9 940.8 900.1 854.1

Source: Company, HDFC sec Inst Research

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Consolidated Cash Flow Year ending March (Rs bn) FY17 FY18 FY19E FY20E FY21E Reported PAT (4.0) (41.7) (76.3) (61.8) (42.4) Net interest expense 39.6 48.1 53.4 48.4 51.9 Depreciation 78.3 84.1 85.2 89.2 93.2 Working Capital Change & others 18.0 (57.8) 21.2 8.2 6.4 OPERATING CASH FLOW ( a ) 132.0 32.7 83.5 83.9 109.0 Capex (177.3) (73.9) (63.1) (70.0) (70.0) Free cash flow (FCF) (45.3) (41.2) 20.4 13.9 39.0 Investments (48.8) (26.8) 58.7 (2.7) (2.4) INVESTING CASH FLOW ( b ) (226.1) (100.7) (4.4) (72.7) (72.4) Debt Issuance 168.4 55.4 45.5 17.6 (7.9) Interest expenses (39.6) (48.1) (53.4) (48.4) (51.9) FCFE 34.6 (60.7) 71.3 (19.5) (23.2) Share capital Issuance - 67.5 - - - Dividends (6.4) - - - - FINANCING CASH FLOW ( c ) 122.4 74.7 (7.8) (30.8) (59.8) NET CASH FLOW (a+b+c) 28.3 6.8 71.3 (19.5) (23.2) Closing Cash & Equivalents 49.8 56.6 127.9 108.4 85.2 Source: Company, HDFC sec Inst Research

Key Ratios FY17 FY18 FY19E FY20E FY21E PROFITABILITY (%) EBITDA Margin 28.7 21.4 7.1 15.8 28.8 EBIT Margin 6.7 (8.4) (30.3) (20.4) (7.2) APAT Margin (1.1) (14.7) (33.5) (25.1) (16.4) RoE (1.6) (16.0) (28.0) (25.6) (22.4) RoIC (or Core RoCE) 1.5 (1.9) (5.6) (4.2) (1.6) RoCE 1.4 (1.8) (5.0) (3.7) (1.4) EFFICIENCY Tax Rate (%) 53.7 35.9 33.5 33.0 33.0 Fixed Asset Turnover (x) 0.4 0.3 0.3 0.3 0.3 Inventory (days) 1 0 1 1 1 Debtors (days) 13 11 14 14 14 Other Current Assets (days) 13 47 35 25 20 CL & Provisions (days) 140 126 167 160 159 Cash Conversion Cycle (days) (113) (67) (118) (121) (124) Net D/E (x) 2.0 2.0 1.9 2.7 3.4 Net D/EBITDA (x) 4.9 9.1 32.5 14.4 7.7 Interest Coverage (x) 0.6 (0.5) (1.3) (1.0) (0.4) PER SHARE DATA (Rs) EPS (Rs/sh) (1.1) (11.6) (21.2) (17.2) (11.8) CEPS (Rs/sh) 2.1 1.0 0.2 0.6 1.2 DPS (Rs/sh) - - - - - BV (Rs/sh) 68.6 62.5 62.6 48.4 38.6 VALUATION P/E (x) (49.5) (4.8) (2.6) (3.2) (4.7) P/BV (x) 0.8 0.9 0.9 1.1 1.4 EV/EBITDA (x) 7.3 13.0 47.4 20.6 10.9 EV/Revenues (x) 2.1 2.8 3.4 3.2 3.2 OCF/EV (%) 17.8 4.1 10.9 10.5 13.4 FCF/EV (%) (6.1) (5.2) 2.7 1.7 4.8 FCFE/Mkt Cap (%) 4.7 (7.7) 9.3 (2.4) (2.8) Dividend Yield (%) - - - - - Source: Company, HDFC sec Inst Research

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Rating Definitions BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Date CMP Reco Target 15-Nov-17 94 BUY 120 10-Jan-18 109 BUY 120 25-Jan-18 94 NEU 96 13-Apr-18 74 BUY 88 30-Apr-18 69 BUY 86 6-Jul-18 55 BUY 70

1-Aug-18 55 BUY 70

RECOMMENDATION HISTORY

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Nov-

17

Dec-

17

Jan-

18

Feb-

18

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

IDEA Cellular TP

IDEA CELLULAR : RESULTS REVIEW 1QFY19

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