Voda Idea board clears ~25K-cr fundraising plan

Vodafone plc says it will not put any equity in the company

Vodafone Idea on Friday decided to raise up to ~25,000 crore by way of share sale and debt from new investors even as its UK parent has planned to stay aloof.

A spokesperson for Vodafone plc said: “Our position has not changed. Vodafone Group does not intend to put any equity into Vodafone Idea.” Vodafone Idea is owned by Vodafone plc and the Aditya Birla group (ABG).

In a meeting here, the board of directors of the company decided to raise the funds via equity share sale of up to ~15,000 crore and another tranche of up to ~15,000 crore via a public offer or private placement of non-convertible debentures. However, the total will not exceed ~25,000 crore, the company said in a statement to the stock exchanges. Both the proposals will be taken up at the annual general meeting, scheduled for September 30.

The company’s promoters are in talks with Us-based investors. Nothing concrete has emerged, said sources.

Telecom analysts said the additional funds would help the company tide over its immediate crisis because both Vodafone plc and the ABG had refused to infuse additional money into the lossmaking venture. “It’s a temporary reprieve for the company,” said an analyst with an Indian brokerage.

Vodafone Idea’s Ebitda (earnings before interest, depreciation, tax, and amortisation) of ~4,100 crore in the June quarter of FY21 was not enough to pay for its capex, interest, deferred spectrum, and the adjusted gross revenue (AGR) dues, all of which amount to over ~30,000 crore annually. This includes AGR dues of ~7,500 crore annually.

It will, however, have some leeway in FY21 and FY22, when, thanks to the moratorium on paying for deferred spectrum (offered by the government), its normal payouts would be lower (deferred spectrum is ~14,000 crore per annum).

But Vodafone Idea has to pay more annually after the two years.

Based on the first-quarter FY21 numbers, nearly 45 per cent of Vodafone Idea’s Ebitda would be used to pay just its AGR dues. And Goldman Sachs estimates its Ebitda needs to go up 4.9x over Q1 FY21 and its average revenue per user (ARPU) by over by 88 per cent (its ARPU in the June quarter was Rs 123) for it to be able to just make its annual outflows.

However, with its debt at 10 times its Ebitda on an annualised basis, it has had no choice but to raise money through equity. It will get around ~4,000 crore by selling its stake in Indus Towers to Bharti Airtel. However, monetising fibre assets may not earn for it a large amount of cash.

Also the company will need to up its capital investment so that it can bridge the gap it has with its rivals in upgrading its 2G network to 4G.