Vodafone Idea expects the sale of its 11.15 per cent stake in Indus Tower to complete in the next three-four months which could yield an estimated Rs 5,500 crore, a senior company official said Tuesday.
Under a contract signed with Bharti Infratel in April 2018, the company has an option to sell the 11.15 per cent stake in Indus Tower for cash ahead of the merger of the country's largest mobile tower firm with the Bharti group firm.
"As things stand now, that process is in NCLT and expectation is that it should be completed in the next 3-4 months timeframe. Before the merger is consummated, we have the right to receive that in cash. The value will fluctuate.
"The value is dependent on Bharti Infratel (stock) price. At current Bharti Infratel price, the cash value is more than Rs 5,500 crore," Vodafone Idea Chief Financial Officer Akshaya Moondra told PTI.
The company expects that the money raised from the stake sale in Indus Tower and the Rs 25,000 crore rights issue, which is opening on Wednesday, will give it long term war chest to compete in the market.
"We believe that the proceeds from the rights issue coupled with the monetisation of our stake in Indus Towers Limited will allow us to make the required investments in the business to achieve our strategic goals," Vodafone Idea Chief Executive Officer Balesh Sharma said.
The board of directors of Vodafone Idea on March 20 cleared the planned Rs 25,000-crore rights issue at a price of Rs 12.50 per equity share, a steep 61 per cent discount to the prevailing market rate.
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In a regulatory filing, the company had said the rights entitlement ratio has been fixed at 87 equity shares for every 38 shares held by eligible shareholders of the company on the record date, that is April 2, 2019.
"Rights issue gives us good funding along with the two other monetisations that we are looking at - a long term war chest to continue on the stated strategy of ours. Our strategy primarily is to integrate the two network as quickly as we can to achieve much gain in coverage and customer experience on one side and profitability on the other because of synergies coming," Sharma said.
Promoter shareholders -- Vodafone Group and Aditya Birla Group -- have reiterated to the board that they intend to contribute up to Rs 11,000 crore and up to Rs 7,250 crore respectively, amounting to a total of Rs 18,250 crore, as part of the rights issue. While Vodafone Group's entire funding will be considered as a foreign investment in the rights issue, Aditya Birla Group may also route funds from its foreign entities, according to sources.
The promoter shareholders have also said that in case the rights issue is under-subscribed, each of the promoter shareholders reserves the right to take up part or whole of the unsubscribed portion, subject to stipulated law.
When asked about the plan of action in case promoter shareholding in Vodafone Idea breaches 75 per cent cap, Moondra said there is interest from investors and he does not promoters holding to breach the limit.
"We don't expect it to cross 75 per cent mark but because this is rights issue and there was some doubt whether Axiata-- one of our large shareholder will participate or not. The shareholders and promoters as a precautionary measure had taken the SEBI approval if they were to participate beyond their entitlement and in case they exceed 75 per cent. At this point of time, we do not see there will be a need to utilise that approval," Moondra said.
According to a JM Financial report, minority shareholders will need to make an investment of at least Rs 5,410 crore in the rights issue to keep promoters holding at 75 per cent.
Vodafone Idea is looking to invest proceeds from the rights issue, Indus Tower stake sale and partial sale of the optical fibre in telecom networks to expand 4G coverage from 61 per cent population at present to over 85 per cent population coverage by March 2020.
Vodafone Idea is in discussion to sell 1.56 lakh kilometre of optical fibre. According to sources, it has received a combined valuation of Rs 20,000 crore for the mobile tower and optical fibre assets.