Vodafone Idea Board Approves Raising Up To Rs 25,000 Crore

Vodafone Idea will raise funds by way of either issuing shares, foreign currency bonds, debentures or warrants.

A woman sits outside a Vodafone India Ltd. retail store in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)
A woman sits outside a Vodafone India Ltd. retail store in Mumbai, India. (Photographer: Dhiraj Singh/Bloomberg)

The board of Vodafone Idea Ltd.’s has approved a fundraising plan to garner up to Rs 25,000 crore, as the cash-strapped telecom operator seeks to turn around in India’s fiercely competitive wireless market.

The board, at its meeting on Sept. 4, approved raising up to Rs 15,000 crore by way of either issuing equity shares, global depository receipts, American depository receipts, foreign currency bonds, convertible debentures, or warrants, according to its exchange filing. It also approved raising up to Rs 15,000 crore by issuing non-convertible debentures by way of a public offer or a private placement.

However, the total fund raise shall not exceed Rs 25,000 crore, the filing said.

Vodafone Idea’s fundraising comes when the billionaire Kumar Mangalam Birla and Vodafone Group Plc.-owned carrier received some legal relief from the Supreme Court in a near two-decade battle with the government over calculation of adjusted gross revenue.

The company owes Rs 50,400 crore to the Department of Telecommunications in past dues, and is weighed down by the Rs 1,65,900-crore debt (including AGR liabilities) and eight straight quarterly losses. BofA Securities estimates that Vodafone Idea’s net debt-to-Ebitda will jump from 7.1 times to 8.4 times for 2021-22.

Analysts said the company will have to hike tariffs and cut costs to sustain operations. While BofA Securities expects average revenue per user requirement of Rs 200-240 over the next 18 months (from current Rs 114) to cover the AGR impact, Morgan Stanley sees it at Rs 199.

But tariff hikes appear difficult as the carrier lost 580 basis points in revenue market share in the quarter ended June. Its share in metro cities dropped from 42% in 2016-17 to 18% as of June 2020. Even in key urban markets, the share declined from 40% to 25%. That compares with a 470- and 200-basis-points gain in market share of Reliance Jio Infocomm Ltd. and Bharti Airtel Ltd., respectively, during the quarter.

Also Read: AGR Verdict: Analysts Positive On Airtel But Cautious On Vodafone Idea

Vodafone Idea suffered a net loss of Rs 25,460 crore in the quarter ended June. Its revenue fell 9.3% sequentially to Rs 10,660 crore. Its operating profit declined 6% quarter-on-quarter to Rs 4,100 crore.

The total promoter shareholding stood at 72.05% as of June 2020. While Indian promoters hold 18.48%, foreign promoters hold 53.57%. Financial institutions hold a 10.8% stake, with foreign investors and mutual funds owning 7.19% and 2.75%, respectively.