Vi promoters take call to invest; telco proposes Rs 14,500-cr fundraise

Promoters of financially stressed telco —Vodafone Idea (Vi) —have decided to invest in the firm after resisting the move for long. Aditya Birla Group and Vodafone Group UK will pump in Rs 4,500 crore in Vi, according to a stock exchange announcement on Thursday. The Vodafone Idea board has also approved a proposal to raise Rs 10,000 crore via equity shares or debt instruments, making it a total of Rs 14,000-crore fund-raising to revive the struggling telco.

This will be the first equity infusion of funds in the company after Rs 25,000-crore rights issue in 2019 and indicates promoter commitment to the business. While Vodafone Group had earlier said it would make no further investments in India, Birla group chairman Kumar Mangalam Birla had even indicated giving up the stake to the government or any financial entity to prevent the telco from going under.

The board has approved issuing 3.38 billion equity shares to the promoter group entities on a preferential basis. The shares will be issued at a price of Rs 13.30, a premium of 20 per cent over Thursday’s closing price of Rs 11.08 on BSE. The company will seek shareholder approval on the proposals on March 26.

Vodafone Group and the Birlas hold 44.3 per cent and 27.7 per cent stake respectively in Vi.

The fundraising announcement comes a week after Vodafone Group announced its intent to exit Indus Towers. The firm has already sold 7.1 per cent stake and is looking for investors to sell the remaining 21 per cent holding. 

Rival Bharti Airtel entered into an agreement with Vodafone plc to buy 4.7 per cent equity in Indus Towers, on the condition that the funds will be used to clear the tower company’s dues.  

Vi received a lifeline last September with the government clearing the telecom reforms package, providing a four-year moratorium on spectrum and adjusted gross revenue dues among other things.

In January, the company opted for conversion of interest on deferred spectrum and AGR dues into equity for the government. As per Vi’s estimate, interest with a net present value of around Rs 16,000 crore would be converted into equity, giving the government 35.8 per cent stake in the company. The proposal is under consideration of the government.

While the four-year moratorium will enable Vi to save around Rs 60,000 crore, fresh fund-raising will help it clear dues and make investments. As of September end, Vi had a gross debt of Rs 1.94 trillion comprising deferred spectrum obligation of Rs 1.08 trillion, AGR liability of Rs 63,400 crore and bank debt of Rs 22,770 crore.

An analyst with a domestic brokerage said the fund-raising announcement was on expected lines. “However it will not make much difference as the amount will be used to clear past dues of Indus Towers. It is not growth capital,” he said.