1. Healthcare

Result Update
January 28, 2015
Idea Cellular Ltd.
Previous
Mixed-set of performance: Maintain HOLD but downward
revision in TP of Rs.160
Rating : HOLD
Rating : HOLD
Key Result Highlights
Target : Rs.160
Target : Rs.167
Rs.mn Q3 FY15 Q2 FY15 Q3 FY14 Q‐o‐Q %
Revenue 80,175 75,699 66,130
5.9%
EBIDTA 27,527 24,907 20,557 10.5%
PAT
7,670 7,559 4,677
1.5%
EPS
2.2
2.1
1.4
1.5%
Current
CMP : Rs.170
STOCK INFO
BSE
NSE
Bloomberg
Reuters
Sector
Equity Capital (Rs mn)
Face Value (Rs)
Mkt Cap (Rs mn)
52w H/L (Rs)
Avg Daily Vol (BSE+NSE)
532822
IDEA
IDEA IN
IDEA.BO
Telecom - Services
33,100
10
612,832
177/125
7,149,744
SHAREHOLDING PATTERN
%
(as on Dec. 2014)
Institutions
Others, Incl Public
Promoters
28.2
29.1
42.7
Source: BSE
STOCK PERFORMANCE (%) 1m
IDEA
13
SENSEX
6
3m
9
12
12m
10
39
Y‐o‐Y % INSPL est Variance(%) Comments
21.2%
80,421
-0.3% In-line Est
33.9%
26,797
2.7% In-line Est
64.0%
8,236
-6.9% Below-Est
52.7%
2.3
-6.9%
Below-Est
Source: Company Filings; IndiaNivesh Research
Idea Cellular Ltd (Idea) Q3FY15 result was largely in-line with our expectations;
except net profit which was below our estimates. Top-line grew by 21.2% Y/Y (+5.9%
Q/Q) to Rs 80.2bn against INSPL est of Rs.80.4bn. The revenue growth was led by
18.1% Y/Y (+5.1% Q/Q) increase in total volume minutes and 16.8% Y/Y (+4.7%
Q/Q) increase in subscriber addition. During the quarter, minutes of usage per user
per month (MoU) increased 3.2% Y/Y (+1.0% Q/Q) to 388 mints (v/s 376 mints in
Q3FY14 and 384 mints in Q2FY15). Average revenue per user (APRU) also went-up
5.9% Y/Y (+1.7% Q/Q) to Rs.179 (v/s Rs.169 in Q3FY14 and Rs.176 in Q2FY15).
ARPM went-up to 46.3 paisa (v/s 44.9 paisa in Q3FY14 and 45.9 in Q2FY15). EBITDA
stood at Rs27.5bn (INSPL est: Rs26.7bn), Up 33.9% Y/Y (+10.5% Q/Q) on account of
higher revenue base. As a result, consolidated EBITDA margin expanded 325bps Y/Y
(down 143 bps Q/Q) to 34.3% (v/s 31.1% in Q3FY14). PAT for quarter stood at
Rs.7.7 bn (INSPL est. Rs.8.2 bn), up 64.0% Y/Y/1.5% Q/Q, owing to higher EBITDA
base, partially offset by rise in depreciation expenditure. During the quarter, the
company reported higher other income of Rs.1,321 mn (v/s Rs.1,139 mn in Q3FY14
and Rs. 1139 mn in Q2FY15). After adjusting other income, net profit stood at
Rs. 6.4 bn, Up 61.0% Y/Y (down 1.1% Q/Q) relative to Rs.3.9 bn in Q3FY14.
Source: Capitaline, IndiaNivesh Research
Key Results Takeaway
IDEA v/s SENSEX
Operating KPI’s Update…
150
140
130

Idea registered increase in subscriber base of 6.7 mn resulting in total
subscriber base of 150 mn (up 4.7% Y/Y). Voice volume grew by 18.1% Y/Y to
171 bn minutes (v/s 145 bn minutes in Q3FY14). On the sequential basis
voice volume increased 5.1% y/y due to seasonal uptick. MoU/sub increased
at 388 minutes relative to 376 minutes in Q3FY14 and 384 minutes in Q2FY15.
Blended churn rate reduced on y-o-y/q-o-q basis to 4.2% from 5.6%/5.0% in
Q3FY14/Q2FY15. During the quarter post-paid churn rate stood at 2.7% [v/s
3.0% in Q2FY15 and 2.7% in Q3FY14] and pre-paid churn rate was at 4.3%
[v/s 5.8% in Q2FY15 and 5.1% in Q3FY14]. ARPU increased to Rs.178 v/s
(Rs.171 in Q3FY14 and Rs.176 in Q2FY15). Average revenue per minutes
(ARPM) increased 3.1% Y/Y/0.9%Q/Q to 46.3 paisa due to increase in VAS
revenue. Idea remains the key gainer in MNP with net gain of 11.9 mn
subscribers. Idea’s VLR subscribers (active subscribers) remain highest in
the industry at 100.9% (to 149 mn subscribers) of total subscriber base.

The share of VAS (non-voice) revenues went up to 23.1% (v/s 21.1% in Q2FY15
and 16.1% in Q3FY14) of total revenue. Total data subscribers increased
33.8%Y/Y to 34.1 mn [v/s 25.5 mn in Q3FY14]. Sequentially, data subscribers
increased 10.4% to 34.1 mn [v/s 30.9 mn in Q2FY15]. Average revenue per
megabytes (ARMB) stood at 26.9 paisa (v/s 26.5 paisa in Q2FY15 and 29.6
paisa in Q3FY14). The company reported data ARPU of Rs.126 (v/s Rs.119 in
Q2FY15 and Rs.91 in Q3FY14). Data contribution to the total services revenue
120
110
100
90
80
70
60
IDEA
22/Jan/15
08/Jan/15
25/Dec/14
11/Dec/14
30/Oct/14
27/Nov/14
16/Oct/14
13/Nov/14
02/Oct/14
18/Sep/14
04/Sep/14
24/Jul/14
21/Aug/14
10/Jul/14
07/Aug/14
26/Jun/14
12/Jun/14
29/May/14
17/Apr/14
15/May/14
03/Apr/14
01/May/14
20/Mar/14
06/Mar/14
23/Jan/14
20/Feb/14
06/Feb/14
50
Sensex
Source: Capitaline, IndiaNivesh Research
Daljeet S. Kohli
Head of Research
Tel: +91 22 66188826
[email protected]
Amar Mourya
Research Analyst
Tel: +91 22 66188836
[email protected]
IndiaNivesh Research
IndiaNivesh Securities Private Limited
601 & 602, Sukh Sagar, N. S. Patkar Marg, Girgaum Chowpatty, Mumbai 400 007. Tel: (022) 66188800
IndiaNivesh Research is also available on Bloomberg INNS, Thomson First Call, Reuters and Factiva INDNIV.
Result Update (contd...)
stood at 15.7% [v/s 14.0% in Q2FY15 and 9.5% in Q3FY14]. Non-data business
contribution to the total services revenue went-up to 7.4% (v/s 6.6% in Q3FY14 as %
of services rev]. The 3G Cell Sites (EOP) increased 39.4% Y/Y to 27,744 (v/s 19,904 in
Q3FY14).
Services business EBIDTA Margins update…
Idea revenues in established and new circles grew by 20.3% Y/Y and 38.5% Y/Y,
respectively. Additionally, EBIDTA from established circles (ESA) increased 35.6% Y/Y.
However, losses in new circles (NSA) expanded to Rs.1.9bn [v/s Rs1.6bn in Q3FY14
and Rs.1.8 bn in Q2FY15]. ESA EBITDA margin expanded 399bps Y/Y to 35.4% on back
of strong operational performance. On sequential basis, ESA EBITDA margin expanded
150bps Q/Q to 35.4% (v/s 33.9% in Q2FY15) due to seasonal uptick. The losses in
NSA attributable to expansion of 3G services in new circles (rolled out 2,580 v/s
1,873 3G cell sites in Q3FY14). We believe losses from the new circles could contract
going ahead, as data business starts generating higher volumes.

Implied Indus EBITDA margins expanded
In Q3FY15 revenues from Indus JV (16%) stood at Rs.6.09bn, up 8.0% Y/Y and 1.8%
Q/Q. Indus EBITDA for the quarter also went up 10.0% y/y/6.1% Q/Q at Rs.2,667 mn
on back of higher revenue base. As a result, Indus implied EBITDA margin stood at
43.7% (v/s 42.9% in Q3FY14 and 41.9% in Q2FY15). Indus EBITDA margin to total
revenue remain contracted to 3.3% (v/s 3.6% in Q3FY14). On the sequential basis
Indus EBITDA margin to total revenue remain muted to 3.3% (v/s 3.3% in Q2FY15).
During the quarter, the owned towers tenancy ratio stood at 1.59 (v/s 1.57 in Q3FY14
and 1.58 in Q2FY15). In Q3FY15, Idea rolled out ~2,326 2G cell sites (v/s ~5,630 in
Q3FY14), taking the total 2G cell site base to ~1,09,931. Idea owns 9,521 towers and
rest of the sites are rented (58,799 sites to Indus).

Capex Update
The Capex guidance for FY15 stands at Rs. 35 billion, excluding any spectrum related
payout. The company’s consolidated net debt stood at Rs.142 bn (v/s Rs.146 in Q2FY15)
with net debt to equity ratio of 0.64x (v/s 0.68x in Q2FY15). Net-debt to forward
EBIDTA is at 1.39x (Rs142/Rs97bn) for FY15E. During the quarter, the capex and net
debt amounts were higher by around Rs.814 million each due to forex loss on account
of currency fluctuation.

3G+Broadband update
Idea launched 4,906 (v/s 7,503 in Q3FY14) new sites (2G+3G) and expanded optical
fibre network to 90,200 km [v/s 71,600 km in Q3FY14] in order to strengthen network
capacities in NLD, ILD, ISP, Data Services and Devices. During the quarter, out of 144
mn subscriber, the number of customers adopting data services stood at 34.2 mn,
now contributing 23.1% to total service revenue. The Data volume grew by 121% Y/Y
to 46,077 mn MB in Q3FY15 [v/s 20,840 mn MB in Q3FY14]. The active 3G subscriber
base for the company now stands at 16.1 mn (v/s 8.7 mn in Q3FY14).

Valuations
At CMP of Rs.170/share, the stock is trading at 7.4x FY15E, 6.5x FY16E, and 5.7x FY17E EV/
EBITDA estimates. The current quarter performance was well in-line with our estimate with
strong volume growth. Additionally, the consistent growth in 3G subscriber base, increasing
data as % of services revenue, and trajectory growth in total data volume (Mn MB) looks
positive. However, uncertainty over launch of Reliance-JIO in 4G (voice/data) and upcoming
spectrum auction remains the key hangover for the stock price. Our target price of Rs.167
is achieved, yielded 14% return since our recommendation. We maintain HOLD but reduce
our target price to Rs.160 (5.3x FY17 EV/EBITDA) on stock due to above mentioned overhang.
YE March
(Rs. Mn)
Net Sales
PBDIT
Adj PAT
EPS (Rs)
EBITDA
Margin (%)
ROE (%)
P/E (x)
EV/EBITDA
(x)
FY14A
FY15e
2,65,190
83,204
20,096
6.0
31.4
12.8
28.7x
7.8x
3,10,272
1,02,390
27,925
7.9
33.0
13.8
21.7x
7.4x
FY16e
3,50,608
1,15,701
33,308
9.4
33.0
13.4
18.2x
6.5x
FY17e
3,96,187
1,32,723
39,619
12.0
33.5
13.1
14.3x
5.7x
Source: Company Filings; IndiaNivesh Research
IndiaNivesh Research
Idea Cellular Ltd|Result Update
January 28, 2015 | 2
Result Update (contd...)
Quarterly Performance
Income Statement (Conso)
(Rs Mn)
Revenue
Gross Revenue - ESA
Gross Revenue - NSA
Revenue ‐ Standalone
Indus (@ 16%)
Spi ce (@41.09)
Eli mi nations
Revenue ‐ Consolidated
Q3 FY15
Q2 FY15
QoQ Ch %
Q1 FY15
Q4FY14
Q3 FY14
YoY Ch %
75,543
4,605
80,148
6,098
-6,071
80,175
71,437
4,236
75,673
5,990
-5,964
75,699
5.7
8.7
5.9
1.8
NM
1.8
5.9
71,547
4,015
75,562
5,854
-5,806
75,610
66,699
3,707
70,406
5,735
-5,703
70,438
62,779
3,326
66,105
5,645
-5,620
66,130
20.3
38.5
21.2
8.0
NM
8.0
21.2
48,802
6,486
55,288
3,431
-6,071
52648
47,245
6,034
53,279
3,477
-5,964
50792
3.3
7.5
3.8
NM
‐1.3
1.8
3.7
47,222
5,744
52,966
-1
3,412
-5,806
50571
45,144
5,381
50,525
-2,420
5,703
48105
43,063
4,907
47,970
-2,422
5,620
45548
13.3
32.2
15.3
NM
‐241.7
NM
15.6
26,741
-1,881
24,860
2,667
27527
0.033265
24,192
-1,798
22,394
2,513
24907
0.033197
10.5
4.6
11.0
NM
6.1
10.5
24,325
-1,729
22,596
2,442
25038
0.032297
21,555
-1,674
19,881
2,420
22301
0.034356
19,716
-1,581
18,135
2,422
20557
0.036625
35.6
19.0
37.1
NM
10.1
33.9
13,792
1,034
14826
18%
10,774
1,014
11788
16%
28.0
NM
2.0
25.8
10,586
959
11545
15%
10,402
977
11379
16%
10,671
995
11666
18%
29.2
NM
3.9
27.1
11,068
1,632
12700
11,621
1,498
13119
‐4.8
NM
8.9
‐3.2
12,010
1,483
13493
9,479
1,443
10922
7,465
1,426
8891
48.3
NM
14.4
42.8
2041
-1,321
720
263
983
2315
-1,139
1,176
269
1,445
‐11.8
16.0
NM
-38.8
NM
‐2.0
-31.9
2295
-290
2,005
270
2,275
2060
-425
19
1,654
312
1,966
1913
-733
34
1,214
362
1,576
6.7
80.2
NM
-40.7
NM
‐27.3
-37.6
Dividend from Indus
0
1026
‐100.0
3623
0
0
NM
Tax‐Break Up
Tax- Standal one
Tax -Spi ce (@41.09)
Tax - Indus (@16%)
Tax-Consoli dated
3,565
482
4047
3,676
439
4115
‐3.0
NM
9.8
‐1.7
3,511
426
3937
2,687
371
3058
2,270
368
2638
57.0
NM
31.0
53.4
PAT Break‐Up
PAT- Standal one
PAT- Spi ce (@41.09)
PAT- Indus (@16%)
Di vi dent El i mi nati ons
PAT‐ Consolidated
6,783
887
7670
7,795
790
7559
‐13.0
NM
12.3
NM
1.5
10,117
788
7282
5,138
760
5898
3,981
696
4677
70.4
NM
27.4
NM
64.0
EBITDA Margin %
Sta ndal one
Cons ol i dated
31.0%
34.3%
29.6%
32.9%
142
143
29.9%
33.1%
28.2%
31.7%
27.4%
31.1%
358
325
8.5%
9.6%
10.3%
10.0%
‐184
‐42
13.4%
9.6%
7.3%
8.4%
6.0%
7.1%
244
249
Q2 FY14
22
127
164
368
44.7
1.6
96
Q3FY14
22
129
169
376
44.9
2
96
Q4 FY14
22
136
173
397
43.6
2
96
Q1 FY15
22
139
181
401
45.1
2
96
Q2 FY15
22
143.6
176
384
45.9
2
96
Q3FY15
22
150
179
388
46.3
2
96
COGS - ESA
COGS - NSA
COGS ‐ Standalone
Spi ce (@41.09)
Indus (@ 16%)
Eli mi nations
COGS ‐ Consolidated
EBITDA
EBITDA- ESA
EBITDA- NSA
EBITDA ‐ Standalone
Spi ce (@41.09)
Indus (@ 16%)
EBITDA ‐ Consolidated
Dep & Amort. Break‐Up
Dep & Amort.- Standal one
Dep & Amort.- Spi ce (@41.09)
Dep & Amort.- Indus (@ 16%)
Dep & Amort ‐ Consolidated
EBIT
EBIT - Standal one
EBIT -Spi ce (@41.09)
EBIT - Indus (@ 16%)
EBIT - Cons ol i dated
Interest & Finance Cost Break‐Up
Int Cos t - Standal one
Int Income - Standal one
Forex Loss /(Gai n) - Standal one
Int & Fin Cost Standalone
Int & Fi n Cost - Spice (@41.09)
Int & Fi n Cost - Indus (@16%)
Int & Fin Cost‐ Consolidated
PAT Margin %
Sta ndal one
Cons ol i dated
Key Performance Indicators (KPIs)
Operating Service Area (EoP) - nos
Subscriber Base (EoP) - mn
Average Revenue Per Unit (ARPU)
Average Minutes of Use Per User (MOU)
Average Realisation per Minute (ARPM)
Tenancy Ratio - Owned Towers
Pre-Paid Subs (% of EoP Subscribers)
Source: Company Filings; IndiaNivesh Research
IndiaNivesh Research
Idea Cellular Ltd|Result Update
January 28, 2015 | 3
Result Update (contd...)
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in this report: Daljeet S Kohli, Amar Maurya, Abhishek Jain, Yogesh Hotwani, Prerna Jhunjhunwala, Kaushal Patel, Rahul Koli, Tushar Manudhane & Dharmesh Kant.
Following table contains the disclosure of interest in order to adhere to utmost transparency in the matter:
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
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BUY. We expect this stock to deliver more than 15% returns over the next 12 months.
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SELL. We expect this stock to deliver <-15% returns over the next 12 months.
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