IDEA CELLULAR LTD., We recommend to Buy with a price target of Buying Level : Target : Support levels : Resistance : 155 Technical Out Look: The scrip has taken trend line support at 130 level. The scrip has formed higher top higher bottom on monthly and is trending firm to wards the target. we strongly recommend to buy the stock on every dip.

Company Outlook Idea Cellular is a part of the US $24 billion Aditya Birla Group and a leading GSM mobile services operator with licenses to operate in 13 telecom service areas in India. The company has operations in Delhi, Himachal Pradesh, Rajasthan, Haryana, Uttar Pradesh (W) & Uttaranchal, Uttar Pradesh (E), Madhya Pradesh & Chattisgarh, Gujarat, Maharashtra & Goa, Andhra Pradesh and Kerala. With the planned expansion into Mumbai, Bihar & Jharkhand, Idea’s footprint will cover nearly 70 percent of India’s telephony potential. Idea Cellular had Million subscribers as on June 30, 2007, and had a market share of 15.4 percent as on June 30, 2007 in its 11 service areas of operation. We think idea looks impressive due to the following reasons:-

Business Summary Higher subscriber addition We expect that the company will see a robust growth in its subscriber base in the coming months in both new as well as existing circles. Moreover it is expected to be allotted spectrum in Mumbai in the coming months. Improvement in EBITDA margins The EBITDA margins are expected to improve both in the existing and the new circles. As more and more subscribers will be added and company will enter into new circles, revenue flow will also be higher. Hiving off tower business Following the footsteps of Bharti and RCom, Idea Cellular has also decided to hive off its tower business into an independent subsidiary. The Board of Directors (BoD) has approved the demerger plan. So value unlocking is on the cards.

Valuation Summary Tower business Demerger The company has planned to hive off its tower business for possible transfer of passive infrastructure. It would result in significant value unlocking. The company had 13,160 cell sites as of Q1FY08 compared to 10,114 cell sites at the end of Q4FY07. Around 4500 towers are on sharing basis. Out of towers about 4,900 are roof top towers and 3,700 are ground based. They have a tenancy ratio 0f 1.3x. Company is expected to increase its cell sites to by FY08.

Financials

Financial Analysis Net sales increase by 64 percent Net sales increased by 64 percent Y-o-Y on account of robust subscriber additions. However the company’s Average Revenue Per Unit (ARPU) has decreased significantly from Rs.362 to Rs.320. Aggressive method of recognizing revenue Idea recognizes entire processing charge from Lifetime prepaid schemes as revenue upfront, while RCom and Bharti amortize the same over 48 months and 24 months, respectively. Thus, Idea’s ARPU, revenues and margins, to that extent are inflated. In Q1FY08 more than 30 percent of net additions were from new lifetime prepaid scheme. We believe that the policy of booking entire processing fee as revenues upfront would have contributed almost Rs.6 to ARPU. Valuation Summary

EBITDA grew by 69 percent Y-o-Y. The EBITDA margins in its ‘established’ circles including Delhi, Maharashtra, Gujarat, Andhra Pradesh, Madhya Pradesh, Haryana, Kerala and EBITDA margins increase by 100bps to 34.7 percent. Uttar Pradesh (W) expanded by 40bps Q-o-Q to 38 percent. Losses in 3 new circles have come down to Rs24.6crore (-40 percent of revenues) from Rs330m (-76 percent of revenues) in last quarter. Company saw reduction in network and marketing expenses as percentage of sales by 160 bps. However access charges increased slightly. PAT increased 259 percent Y-o-Y due to margin expansion, lower depreciation and interest expense Idea’s net profit grew by percent Y-o-Y. It’s depreciation and amortization charge decreased by 320bps Y-o-Y as a percentage of net sales. Interest expenses also were significantly less as percentage of sales. Valuation Summary

Financials

Disclaimer: This report has been prepared solely for information purposes and the information contained herein may not be deemed to be an investment advice. Such information is impersonal and not tailored to the investment needs of any specific person. The information contained herein is not a complete analysis of every material fact representing any company, industry or security. The views expressed may change. While the information contained herein has been obtained from sources believed to be reliable, no responsibility (or liability) is accepted for the accuracy of its contents. Investors are advised to satisfy themselves before making any investments and should consult with and rely upon their own advisors whether and how to use such information in making any investment decision. Neither the author nor his firm accepts any liability arising out of use of the above information/ article. This report is exclusively for the clients of Venkataraman & Co. only. VENKATARAMAN & CO., Stock & Share Brokers, New No.2 (Old No.52) Dr. Ranga Road, Mylapore, Chennai Web: