Vodafone Idea plans QIP, shelves debt fundraising

Change in investor sentiment, company’s prospects said to be behind move

MUMBAI/NEW DELHI: Vodafone Idea Ltd (Vi), which was trying to raise as much as $2 billion in hybrid debt, may now opt for a pure equity round instead, two people directly aware of the company’s plans said.

The development marks a distinct shift in the telecom operator’s strategy, announced soon after the Supreme Court (SC) in September extended a deadline to repay outstanding regulatory dues in a staggered manner.

Shortly after the SC judgement, Vi announced plans to raise around $2 billion (around ₹15,000 crore today) via hybrid instruments (debt with an optional component of convertible) first, which was to be followed by an equity raise.

“VI is considering a change in strategy now because investor sentiment has significantly improved along with the company’s prospects,” said the first person.

“The company now plans to raise capital via a fresh equity issuance through a qualified institutional placement (QIP),” the first person added.

The fundraising is likely to be done in two tranches, and the plan is to bring in a large marquee investor so that the stock gets a fillip. Only after the stock price improves will the second tranche be launched so that the sale does not result in too much dilution of promoters’ stake,” said the first person. The appointed bankers for the proposed deal have held a series of meetings with potential buyout funds, high net worth individuals, private equity funds and other institutional investors over the past few weeks.

“In the proposed qualified institutional placement, the existing promoters are also likely to participate to ensure their holding doesn’t get diluted much and also the much-required capital infusion is done,” said the second person.

The UK’S Vodafone Group

Plc holds around 43% in Vi, while the Aditya Birla group holds 29%.

“The plan is to capitalise on the increasing optimism among institutional investors for equities of Indian companies that has started after the US elections. Every investor the bankers have met believes in the growth potential of India’s telecom sector, especially as the consumer preference is drifting towards digital modes not only for marketplace transactions but also for entertainment and education,” said the second person.

A Vi spokesman did not respond to an email seeking comments.

On November 19, Mint reported that a consortium led by Us-based Oaktree Capital, including a few other private equity firms such as Varde Partners, has proposed investing up to $2.5 billion into cashstrapped Vi through hybrid debt papers.

The consortium is said to have offered $2-2.5 billion of capital to the Birla group company that faces tens of billions of rupees in government debt.

Mint reported on September 3 that Amazon.com Inc. and Verizon Communications, the largest wireless carrier in the US, were also in talks to buy a significant stake in struggling Vi for more than $4 billion.

Vi continues to lose millions of wireless users every month and needs urgent fund infusion to be able to fund its operations and invest in fresh capex to upgrade its networks to 5G ecosystem, which is expected to cost several thousands of crores.

To improve business viability Vi has been focusing on doubling its average revenue per user (Arpu) to make cash flows sustainable to be able to meet its debt obligations.

Vodafone Idea has so far paid ₹7,854 crore in adjusted gross revenue, or AGR dues, but still owes more than ₹50,000 crore to the department of telecommunications, which it needs to pay in the next 10 years.

IN THE PROPOSED QIP, THE EXISTING PROMOTERS ARE ALSO LIKELY TO PARTICIPATE