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The cash-strapped telco will issue debentures “having a face value of Rs 10,00,000 each, in one or more tranches, aggregating up to Rs 1,600 crore, convertible into equity shares at a conversion price of Rs 10 per equity share,” Vodafone Idea (Vi) said in a notice to the stock exchanges late Friday.
Vi shares had ended the week at Rs 8.72, up 1.8%, on the BSE.
“Funds so raised shall be used to pay amounts owed to ATC under the master lease agreements and, to the extent of any remainder, for general corporate purposes of the company,” the company said.
The operator still owes about Rs7,000 crore to another tower company, Indus Towers, which has threatened to cut the telco’s access to its sites from November, unless the dues are cleared.
Vi and ATC didn’t respond to ET’s queries.
The preferential bond issue to ATC is subject to conditions, including the government converting the interest from deferment of the telco’s adjusted gross revenue (AGR) and spectrum dues into equity, the carrier said. The finance ministry has already cleared a proposal to convert Vi’s Rs 16,130 crore accrued interest on deferred AGR-related dues into equity. The matter has been pending with the telecom department for over four months. Once converted, the government will own about 33% of Vi’s equity and become the single largest shareholder in the loss-making entity.
The OCDs will carry a coupon rate of 11.2% per annum, payable semi-annually during its term. The maximum term of the OCDs is 18 months from the date of issue and allotment of the first tranche, the company said.
Loss-making Vi urgently needs cash to not just invest in 4G capex but also to tie up vendor contracts for its pending 5G rollout, for which it is under increasing pressure to clear dues. Efforts to raise Rs20,000 crore via a mix of debt and equity have been unsuccessful for over a year now.
Co-promoted by UK’s Vodafone and India’s Aditya Birla Group, Vi needs cash to repay large vendors such as Indus, ATC, Nokia and Ericsson among others, invest in network capex and rein in heavy customer losses to rivals Reliance Jio and Bharti Airtel.
At the end of September, Vi is estimated to have owed about Rs 12,000 crore to vendors. Besides ATC and Indus, it's estimated to owe almost Rs 3,000 crore to Nokia and around Rs 400 crore to Ericsson.
At June-end, Vi’s net debt was upwards of Rs 1.98 lakh crore while its cash and cash equivalents were at Rs 860 crore.
Analysts said the planned issue of OCDs to ATC appears more of a stopgap arrangement.
“It’s unlikely to have any long-term impact on the telco's fortunes as such… it probably will just help continue operations for now,” said an analyst at a top brokerage.
Another senior industry<\/a> executive said Vi could face stiff challenges soon, especially if it’s unable to clear its much larger dues to Indus. More so, since Indus recently warned Vi that it would cut off access. Subsequently, Vi had told exchanges that it was in talks with Indus for softer payment terms. Losing access to Indus’s towers would disrupt Vi’s mobile services to its 253 million customers.
Vi has convened an EGM on November 21 to seek shareholder approval on the preferential issue to ATC. The relevant date for determining the floor price is October 21.