Govt expects Voda Idea fundraise in 2 months | The Financial Express

Govt expects Voda Idea fundraise in 2 months

Substantial discussions carried out with firm, says telecom secretary

Govt expects Voda Idea fundraise in 2 months
Vodafone Idea is looking at a fundraise of around Rs 20,000 crore,

The department of telecommunications expects Vodafone Idea’s fundraising exercise to start in around two months time, telecom secretary K Rajaraman told FE on Tuesday.

“We have done substantial discussions in the last few months and now I believe they will be able to do something, including raising funds and bringing in their own capital,” Rajaraman said.

Declining to disclose whether the company has given a definite timeline and the quantum of funds that would be raised, the secretary said, “The government has done its bit. Now, it is for the company to take further action. Over the next two months we expect some action”. He added, “The idea is that they (Vodafone Idea promoters) would do all that is possible to ensure that the prospects of the company improves.”

On whether the government would also convert Vodafone Idea’s principal dues into equity after the four-year moratorium on adjusted gross revenue and spectrum dues ends, Rajaraman said, “We have to see how they perform now. At this point in time, it’s premature to talk about any of that.”

He said the government has not given any directions to Vodafone Idea with regard to rolling out 5G services, but the company is bound by the rollout obligations, which are part of auction guidelines. “The company has bought the spectrum, so they will anyway have to invest on 5G,” the secretary said.

On Friday, the government decided to convert the company’s accrued interest worth Rs 16,133 crore on account of deferment of AGR and spectrum dues into equity. The government said that Aditya Birla Group, one of the promoters, has given a commitment to bring in additional funds. Upon conversion, the government will become the single-largest shareholder in Vodafone Idea with a 33% stake.

On Tuesday, the company said in a regulatory filing that its board has approved the allotment of equity shares to the department of investment and public asset management, Government of India.

The government’s nod on equity conversion came over a year after the company opted to avail this option provided as part of government’s relief package to telecom service providers announced on September 15, 2021. Lately, Vodafone Idea has been struggling with regard to its operating metrics and had pinned hopes on the government’s equity conversion to raise external funds from investors and lenders.

While Vodafone Idea is looking at a fundraise of around Rs 20,000 crore, analysts believe that the company would need about `40,000-60,000 crore to run its business meaningfully.

At the end of the July-September quarter, Vodafone Idea’s gross debt (excluding lease liabilities and including interest accrued but not due) was at Rs 2.20 trillion, comprising deferred spectrum payment obligations of `1.36 trillion, AGR liabilities of Rs 68,590 crore that are due to the government, and debt from banks and financial institutions of `15,080 crore. Vodafone Idea’s net loss stood at Rs 7,595.5 crore during the July-September quarter.

According to Goldman Sachs, the Rs 16,000-crore equity conversion accounts for only 7% of the company’s total debt and would not offer any immediate savings on the free cashflows. Further, analysts have also said the telecom operator would continue to face issues in raising cash unless the government also converts the principal amount on AGR and spectrum dues after the moratorium ends. Of the total dues, the company owes about `1.89 trillion to the government.

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First published on: 08-02-2023 at 06:20 IST