SBI-Led Consortium Not In Favour Of Financing Vodafone Idea Further
Lenders likely to snub Vodafone Idea's call for emergency financing that would have gone to repay dues to Indus Towers.
Banks led by State Bank of India are not in favour of taking further credit exposures to Vodafone Idea Ltd., according to two people with direct knowledge of the development.
Lenders are awaiting further clarity on the status of the government's stake in Vodafone Idea and for the promoters of the company to bring in more equity capital, according to the people quoted above. The promoters include Vodafone Plc and Aditya Birla Group.
The call follows a request by Vodafone Idea for Rs 7,000 crore worth emergency financing the beleaguered telecom company placed in front of a consortium of lenders. The Economic Times on Friday first reported that the company had sought emergency financing from lenders.
The emergency funds would have been used by the company to repay its dues to Indus Towers Ltd. The tower company has faced a financial crunch owing to non-payment of duces by Vi.
While speaking on the sidelines of an event on Thursday, Union Telecom Minister Ashwini Vaishnaw said that conversion of the government's dues to equity alone cannot help Vodafone Idea.
"Vodafone (Idea) has many requirements. It has a particular requirement of capital. How much capital, who will infuse? All those things are under discussion at this point of time," Vaishnaw said.
In January 2021, the government had agreed to convert its outstanding dues worth around Rs 16,000 crore to 35.8% equity stake in Vodafone Idea. This move would have diluted the stakes of both the promoters in the company.
While this would have reduced some of the burden on Vodafone Idea, it does not provide necessary cash to keep the lights on, the people quoted above said. Vodafone Idea has liabilities worth around Rs 2 lakh crore, these people added.
Lenders estimate that the telecom operator would need around Rs 40,000-50,000 crore to remain a going concern, first of the two people quoted above said. Assuming a 3:1 debt-to-equity ratio, the promoters of the company would need to bring in at least Rs 10,000-12,000 crore worth equity capital, the first of the two people quoted above said.
So far, neither promoters have indicated that they are willing to invest further in Vodafone Idea, the two people said. If they are not keen on investing these funds, it would be better for them to sell the company to a new promoter, willing to continue investing, the second person added.
In 2021, fears of Vodafone Idea not remaining a going concern had mounted and the market expected the Indian telecom market to become a duopoly. While a government bailout temporarily allayed those fears, a lack of clear fundraising plan is now haunting the telecom company again.
Queries emailed to Aditya Birla Group and SBI on Friday evening remained unanswered.