Vodafone India has started repaying bank loans through the money raised in bonds last month. Sources say the company recently repaid Rs 3,000 crore it borrowed from State Bank of India (SBI).
Three group companies of Vodafone India — Vodafone Spacetel, Vodafone Cellular and Vodafone South — had raised Rs 7,500 crore last month. While foreign portfolio investors (FPIs) invested in the bond, bankers told FE that Vodafone Group Plc — the parent company — bought a major portion of these bonds.
Sources say SBI had extended credit to Vodafone worth Rs 4,000 crore at Rs 10.45% and the company has repaid most of it through the money raised at 10.25% in the 5-year rupee bond.
“The bank did not charge any pre-payment penalty because if a company as cash-rich as Vodafone is penalised, it will deter it from applying for further loans,” he said.
An email sent to the company seeking comments remained unanswered.
The bonds were priced at 10.25%, which was at least 25 basis points higher than a comparative AA rated subordinate debt in that period. The yield on the government bonds was 8.10%.
Dealers say the yield was higher due to the huge size of the issue and the subordinate nature of the bond. A subordinated debt is an outstanding debt of a company which, if the company goes into liquidation, will be paid off only after all other debts are cleared. “The company wanted to repay its high cost bank debt,” said a banker.
In FY14, Vodafone India reported a net loss of Rs 115 crore on the back of Rs 3,684 crore in revenues from operations. Its finance costs stood at Rs 1,198 crore in FY14, down 6.3% over the previous year and the company’s debt stood at Rs 19,730 crore in FY14.
Last month, agencies had quoted law firm Shardul Amarchand Mangaldas — the sole transaction counsel for the company — saying that Vodafone’s Indian units raised R7,500 crore through private placement of rated, unlisted, redeemable, non-convertible debentures and another R1,300 crore by simultaneous rights issues to refinance corporate debt. “Indian units of Vodafone have raised R8,800 crore to refinance corporate debt and for other corporate purposes,” it had said.