Vi hard sells FPO to over 250 hedge funds, institutional investors

Aditya Birla Group has shopped Vodafone Idea’s proposed follow-on public offer to around 250 institutional investors in the last 40 days in a bid to shore up support for the fund raise plan. Sources close to the development told businessline that the Birla camp wants to be sure that the ₹20,000 crore target in equity fundraise is successful this time.

On February 27, Vodafone Idea said it would raise ₹45,000 crore as a mix of debt and equity, with ₹20,000 crore coming from likely investors and ₹25,000 crore coming as additional debt from lenders. For that purpose, the company is slated to launch an FPO of ₹20,000 crore this week.  

• Read more: Jio dominates telecom market with 41.78 lakh new subscribers in January: TRAI data

Sources familiar with the matter told businessline that the Birla group has been conducting extensive roadshows to hundreds of investors in the past 40 days – in a bid to secure funds. While some sections of the market is confident that Vodafone Idea would secure the funds this time around, skepticism for the FPO still remains, since it is not too clear what is different about Vi’s business plan this time around. 

Since the government initiated a bailout plan for the telco in 2021, which involved a four-year moratorium on spectrum and AGR payments, along with a provision to convert a certain portion of the government’s debt to equity – the cash strapped telco has been trying to raise equity on all fronts, going to global telecom companies, strategic investors and private equity firms with limited success. In the last two years, promoters have infused equity in a piecemeal fashion, banks have refinanced debt, the government has also converted ₹16,000 crore in debt-to-equity, but no investor has confidently arrived on the scene to infuse funds in the firm, needed for capital expenditure in its networks as well as to pay off upcoming debt. 

Despite setting a target to raise ₹20,000 crore as a mix of debt and equity nearly two years ago, Vi continues to struggle, failing to meet these fundraising goals. Meanwhile,  competing operators, Reliance Jio and Airtel, have set up their 5G networks, while Vi has made limited capital expenditure in the last two years. 

Shriram Subramaniam of InGovern Research Services said, “Vodafone India’s FPO will receive a lukewarm response as it is losing subscribers to competitors and its financials are weak. Unless the government waives its huge debt, it is difficult to see the financials turn into positive territory.”

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