State Bank of India has agreed to lend Vodafone-Essar, the joint venture between UK’s Vodafone and Essar, Rs 10,000 crore to finance the company’s entry into 3G (third generation) telecom services and expansion of its broadband operations.
The five-year loan carries an interest rate of 13.25 per cent for the first two years; thereafter, it will be re-adjusted on the basis of the average prime lending rate of four public sector banks — SBI, Punjab National Bank, Canara Bank and Bank of Baroda, sources said.
Banking sources said SBI had decided to down-sell Rs 7,000 crore to other banks and financial institutions and will retain an exposure of Rs 3,000 crore. The interest rate for the first two years is a percentage point above SBI’s benchmark prime lending rate.
| VODAFONE’S NUMBERS | ||
| December 2006 | Mar-08 (15 months) | |
| Share capital | 414 | 414 |
| Reserves & Surplus | 10,106 | 12,216 |
| Loans | 6,232 | 10,040 |
| Total revenues | 9,151 | 17,932 |
| EBIDTA | 2,973 | 6,029 |
| Net profit | 1,411 | 2,122 |
Vodafone-Essar could use about Rs 6,000 crore to expand the telecom service provider’s current network and to pre-pay part of its previous debt.
Asked about the loan, a Vodafone Essar spokesperson said: “We are using the bank facility for various business purposes.”
Meanwhile, the third largest mobile operator has pledged 51 per cent of the share capital of most of its six-odd subsidiary companies, which collectively account for 85 per cent of revenues and 92 per cent of the subscriber base.
It has also pledged the licences for the 23 circles in which it operates.
Vodafone Essar already has Rs 10,040 crore of debt on its books as on March 2008, so the fresh borrowing would take its combined loan exposure to around Rs 20,040 crore, said a banker involved in the transaction. Based on the figures provided in the latest annual report for the year ended March 2008, the company’s debt equity ratio will, however, be less than 1.6.
Sources said that Infrastructure Development Finance Company (IDFC), which has an exposure of Rs 800 crore in the Vodafone Essar, may pick up about Rs 500 crore of the new loan. SBI is in talks with other banks for the remaining amount
Sources in Vodafone Essar said as far as the company is concerned, the Rs 10,000-crore commitment has come from SBI. “Whether SBI is down-selling part of the loan to other banks, we have nothing to do with it,” said a company official.
