Vodafone Idea (VIL) plans to raise Rs 2,000 crore through equity shares and/or convertible securities issuance on a preferential basis to one or more entities belonging to UK-based Vodafone Group.
The board will meet on December 9 to consider the proposal for the issue, the company said in a filing to the exchanges.
Analysts say that Vodafone Idea’s proposal to raise funds could be to accelerate the payment of dues to Indus Tower. The struggling telco owed Rs 5,800 crore in FY22 to Indus Towers which stands at Rs 3,500 crore as on September 30, 2024.
“This is fund raise is likely to be used to repay the outstanding dues to Indus Towers (this structure was part of the security package agreed during Indus-Infratel merger), which at the end of Q225 stood at Rs 3,500 crore,” analysts from Axis Capital noted.
The proposal comes a day after the UK parent announced its exit from Indus Towers in which it held a 3% stake.
“The proceeds will be used firstly to repay Vodafone’s outstanding borrowings of $101 million to Vodafone’s existing lenders, secured against Vodafone’s Indian asset,” Vodafone Group said in a regulatory filing announcing the exit. In June 2023, Vodafone Group sold 18% of its stake in the tower company to raise $ 1.8 billion.
Vodafone Group holds a 22.56% stake in VIL while, Aditya Birla Group’s holding is at 14.76%. The government owns 23.15% stake.
During the Indus and Bharti Infratel merger, the parties involved – Bharti Airtel and Vodafone – agreed to a security package for Indus’ benefit, which could be invoked in case Vodafone Idea was unable to meet its payment obligations. This included prepayment of Rs 2,400 crore in cash by Vodafone Idea to Indus, which will be kept as security (paid by December 2020 quarter), a primary pledge of 190 million shares owned by the Vodafone Group in Indus (valued at roughly Rs 4,000 crore) and a secondary pledge over shares owned by Vodafone Group in Indus, with an additional liability cap of Rs 4,250 crore.
“Our base case assumed that VIL will utilise its internal accruals, generated from the recent tariff hikes and network strengthening, to pay off the residual Indus dues in the coming 3 quarters. The Vodafone fund raise would likely accelerate the repayment schedule,” they added.
Apart from this, Vodafone Idea is also looking at raising funds to service its Rs 50,000-55, 000 crore planned capex over the next three years. The company, which ramped up quarterly capex in Q2FY25 to Rs 1,360 crore towards network upgradation has earmarked another Rs 8,000 crore in capex spends for the remaining half of FY25.
In April this year, the telco raised Rs 18,000 crore through a follow-on public offer (FPO). The proceeds from the FPO were to be used towards network expansion, spectrum payments, 5G rollout and upgradation of 4G services.
The cash strapped telco’s debt from banks and financial institutions at the end of the September quarter was Rs 3,250 crore. The payment obligations to the government stood at Rs 2.12 lakh crore as of September 30 which includes deferred spectrum payment obligations of Rs 1.42 lakh crore and AGR liability of Rs 70, 320 crore.