Grasim may pull the plug on Voda Idea investment

Minority shareholders of Grasim Industries, who own 60 per cent stake in the company, are unlikely to agree for further investment in Vodafone Idea, say bankers.

This is because they have seen zero returns on their investments in the telecom company.

Last week, the operator agreed to raise up to ~25,000 crore by issuing fresh equity and debt. However, with Grasim taking a ~2,900-crore hit on its investment in the Vodafone Idea rights issue last year, bankers said the listed entity may not burn further cash in the venture.

The Birlas own 27.5 per cent stake in the operator. Of this, Grasim owns close to 11.55 per cent. “The shareholders of Grasim, which include top institutions, will ask why they should invest more money in a loss-making venture. With zero returns since the investment in the rights issue last year, Grasim’s minority shareholders are not impressed,” said the head of a fund house.

With Grasim withdrawing from any investment in Voda Idea, Aditya Birla (AB) Group will either have to invest through other firms or let its stake in the telecom firm fall, said bankers.

Before Covid-19 hit the Indian economy, Grasim had plans to invest ~3,880 crore in FY21 as capital expenditure. However, with the government announcing a lockdown, capex for the entire year was scaled down.

An uptick in sales volume from May reflected a month-on-month improvement in revenues and Ebitda (earnings before interest, tax, depreciation, and amortisation) across all its businesses.

Besides running its own businesses like viscose staple fibre or VSF, Grasim also holds stake in key AB Group firms like Voda Idea, Ultratech, and Aditya Birla Capital. This attracts a holding company discount. As of Wednesday, Grasim had total market valuation of ~45,000 crore, at ~686 a share.

The fundraising by Voda Idea comes at a time when the firm is fighting a pitched battle with Reliance Jio and Bharti Airtel to retain market share.

It was hit hardest by the Supreme Court ruling in October last year, which required it to pay dues worth ~58,254 crore to the government pertaining to adjusted gross revenues (AGR).

However, the apex court later gave 10 years to all telecom companies to pay their pending dues. Voda Idea has already paid ~7,854 crore towards AGR dues to the telecom department.