In a relief to cash-strapped telecom operator Vodafone Idea, its promoters including Aditya Birla Group and Vodafone Plc have agreed to pump in fresh equity of ₹4,500 crore.

The company will also raise an additional ₹10,000 crore by way of private placement, qualified institutions placement or through any other permissible mode in one or more tranches. 

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Board meeting

The decisions were taken at the company’s board meeting on Thursday. The promoters will be given 3.38 billion equity shares of face value of ₹10 each at an issue price of ₹13.30 per equity share (including a premium of ₹3.30 per equity share), which is at a 10 per cent premium to the floor price of ₹12.08 as per SEBI (ICDR) Regulations.

Vodafone Idea’s shares closed at ₹11.08 a piece on BSE on Thursday. The stock has rallied 16 per cent in the last 4 trading sessions. dhe stock had hit a 52-week high of ₹16.79 on December 10, 2021.

The equity investments will be made through Euro Pacific Securities Ltd and Prime Metals Ltd (Vodafone Group entities), and Oriana Investments Pte. Ltd (Aditya Birla Group entity) on a preferential basis.

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The relevant date, in terms of provision of ICDR Regulations for determining the floor price of the Preferential Issue, is February 24, 2022. The company board also approved convening of an extraordinary general meeting on March 26, 2022 to approve the fund raising plan.

Last week, Vodafone group raised around ₹1,442 crore by selling 2.4 percent stake in Indus Towers. It will also sell another 4.7 percent stake to Bharti Airtel in the tower company. The cash from this deal will be used by Vodafone,as fresh equity in Vodafone Idea,and simultaneously remitted to Indus Towers to clear Vodafone Idea’s outstanding dues.

‘Positive move’

According to industry experts, the move by the promoters augurs well for the beleaguered telecom company as it sends a positive signal to potential investors.

“The promoters, both Vodafone Plc and Aditya Birla Group, had earlier taken a stand that they will not put in additional money into the joint venture. This had put off a number of investors as they wanted the promoters to have their skin in the game. The fresh equity will no doubt help in building the perception that Vodafone and Aditya Birla Group have not given up on the telecom company,” said an industry analyst. 

Major concerns

Vodafone Idea has been trying to raise funds for over a year. It has initiated discussions with a number of potential investors. However, they had two concerns.

First, Vodafone Idea owes over ₹1 lakh crore to the government in the form of AGR and spectrum payments. Second, they wanted existing promoters to put in additional equity. The first issue has been partially addressed with the government agreeing to convert ₹16,000 crore of interest payments into equity. The second issue has now been addressed with both promoters agreeing to put in additional equity. 

Debt concerns

At the centre of Vodafone Idea’s woes is the ₹1.7 lakh crore debt it has on its books. In addition to meeting its debt obligations, the operator will need another ₹50,000 crore this year to upgrade its existing 4G networks and for rolling out new services based on 5G technology.

“While the fresh cash infusion is yet another confidence-building measure, the operator will have to bring in a strategic investor soon if it wants to secure its long terms viability,” said a market expert.

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