Vodafone Idea’s Board has approved raising up to Rs 25,000 crore via a mix of debt and equity instruments in one or more tranches, which will be used to pay statutory dues and invest in network operations to take rivals.
“The Board of Directors of the Company……..approved the raising of funds through (a) issue of equity shares or securities convertible into equity shares, Global Depository Receipts, American Depository Receipts, foreign currency convertible bonds, convertible debentures, warrants, composite issue of non-convertible debentures and warrants entitling the warrant holder(s) to apply for equity shares or a combination thereof up to an aggregate amount of Rs. 15,000 crore by way a public issue, preferential allotment, private placement, qualified institutions placement or through any other permissible mode in one or more tranches; and (b) issuance of unsecured and/or secured, non-convertible debentures up to an aggregate amount of Rs. 15,000 crore, by way of a public offering or private placement basis or otherwise, in one or more tranches,” said the company in a regulatory statement on Friday evening.
“However, the total raising of funds under (a) and (b) above shall not exceed Rs. 25,000 crore,” it added.
Friday, the shares of VIL touched a 52-week high at Rs 13.45 apiece in intraday trade, before paring gains to close at Rs 12.01, down 4.4% on the BSE. The Board’s decision came after market hours.
The debt-laden company’s Board meeting comes after the Supreme Court gave telcos, including VIL, 10 years to pay their adjusted gross revenue (AGR) dues. VIL’s balance AGR dues amount to around Rs50,400 crore. Analysts estimate that the two-year-old operator will face an outflow of Rs 7,000 crore annually, beginning March 2022, to service the statutory dues. Besides, it also needs funds to expand its 4G network to compete effectively with its rivals Reliance Jio and Bharti Airtel.
Analysts say the telco, borne out of the merger of Vodafone India and Idea Cellular NSE -3.98 % in August 2018, needs to raise $3 to $4 billion in 12-18 months.
According to industry executives, VIL was waiting for AGR’s decision to chalk out its funding plans. It had earlier announced that the funding could be via a public issue, preferential allotment, private placement, including a qualified institutions placement or through any other permissible mode and/or a combination thereof as may be considered appropriate, by way of issue of equity shares or by way of issue of any instruments or securities including securities convertible into equity shares, Global Depository Receipts, American Depository Receipts or bonds including foreign currency convertible bonds, convertible debentures, warrants, and/or non-convertible debentures including non-convertible debentures along with warrants.
In a report, Deutsche Bank said a “massive (stock) dilution” is needed to “de-gear Vodafone Idea….would allow the owners to stabilize a business that has lost a third of its subscribers in the seven quarters since merging”. The telco has about 280 million customers, a far cry from the 408 million at the time of its merger in August 2018.
Currently, Vodafone Group holds 44.39% in the telco, with the Aditya Birla Group owing 27.66%. The company is laden with a debt of Rs 1.5 lakh crore.
Besides fresh funding, Vodafone Group is expected to infuse around Rs 6,600 crore as per pre-agreed merger terms. The British telco has already put in over Rs1,800 crore under this arrangement, of a total corpus of Rs8,400 crore. Additionally, the telco can look forward to income tax refunds, around Rs1600 crore from VIL’s stake sale in the Indus Towers-Bharti Infratel merged entity and the sale of its fibre and data centre, which is estimated to generate $1.5-2.1 billion.