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The telco will raise Rs 4,500 crore ($600 million) via a preferential allotment at Rs 13.30 a share to its promoters and related entities, Vodafone Idea<\/a> said in an exchange filing on Thursday. Vodafone Group<\/a> will invest Rs 3,375 crore, or $450 million, which will be paid from the funds raised by the partial sale of its stake in Indus Towers, the UK telecom major said in a separate statement. ABG is likely to invest the remaining Rs 1,125 crore but the diversified conglomerate didn’t comment.
An additional Rs10,000 crore will be raised either through equity or debt or a mix, Vodafone Idea said. It didn’t give specifics or timelines for closing the fundraising exercise. Its management had earlier set a March-end deadline to close the fundraising.
Change in stance post government package<\/strong>
The fund infusion by the promoters marks an about turn of sorts as they had for long refused to infuse fresh equity into the carrier which has never posted a profit since being created out of the merger of Vodafone India and Idea Cellular in August 2018. But the government relief package announced last September—which allowed the company to defer statutory dues by four years among other supporting steps—gave significant cash-flow relief to the telco, and prompted promoters to change their stance.
Analysts say fund infusion by the promoters will give potential investors the confidence to participate in the capital raising efforts of the operator, even though some felt that the Rs 14,500 crore fund-raise target was slightly below expectations. The loss-making telco, with a cash balance of Rs 1,500 crore at December end, has been in talks with a slew of private equity players such as Apollo Global for equity and debt funding.
At present, Vodafone Group and ABG own 44.39% and 27.66%, respectively, in Vodafone India. The ownership structure is likely to see significant changes, especially with the telco opting to convert the interest, which accrues due to the deferred payment into government equity. Vodafone Idea had said in January this year that by its calculations, the government could end up owning around 36% of the telco. The government hasn’t confirmed this so far.
In its statement, Vodafone Idea said its board has approved issuing of up to 3,38,34,58,645 equity shares at Rs 13.30 a share “for an aggregate consideration of up to Rs 4,500 crore to Euro Pacific Securities Ltd. and Prime Metals Ltd. (Vodafone Group entities and promoters of the company), and Oriana Investments Pte. Ltd (an Aditya Birla Group entity forming part of the promoter group) on a preferential basis…”.
The carrier’s stock ended 6.1% higher at Rs 11.08 on the BSE Thursday.
The telco will also issue “…equity shares or securities convertible into equity shares, Global Depository Receipts, American Depository Receipts foreign currency convertible bonds, convertible debentures, warrants, composite issue of non-convertible debentures and warrants entitling the warrant holder(s) to apply for equity shares, or a combination thereof, up to an aggregate amount of Rs 10,000 crore by way of private placement, qualified institutions placement or through any other permissible mode in one or more tranches,” Vodafone Idea added in the statement.
The company’s board also approved convening of an extraordinary general meeting on March 26 to approve the latest fundraising moves.
The telco is desperate to raise funds to invest in expanding its 4G network to arrest its rapid subscriber losses, as well as take a meaningful part in the upcoming 5G spectrum auctions. Analysts said that raising Rs10,000 crore swiftly is crucial to its future.
“Vi's targeted Rs 14,500-crore fundraise is a tad below expectations and won’t be enough to turn around the company financially. But fresh capital infusion by its co-promoters will strengthen its balance sheet, and also give external investors and banks the confidence to participate more enthusiastically in the telco’s future fundraising endeavours,” Naveen Kulkarni, chief investment officer at Axis Securities, told ET.
In its statement, UK’s Vodafone said it has raised Rs 1,420 crore by selling 63.6 million shares, or 2.4%, in Indus Towers at Rs 226.84 a share. It further plans to sell 127.1 million shares, or 4.7%, in Indus to Bharti Airtel for Rs 224.57 a share. This would net the British telecom major under Rs 2,900 crore, which, under its pact with Airtel, would have to be used to be infused into Vodafone Idea, which would use it to clear its payables to Indus Towers.
“Vodafone has the option to contribute any residual proceeds from the sale of the primary shares (in Indus) as capital to Vi before July 15, 2022. Any residual proceeds that are not contributed to Vi will be available to Indus until November 19, 2022, to guarantee Vi’s obligations under the Master Services Agreements,” Vodafone Group said.
After selling a total 7.1% stake in Indus, Vodafone would retain 567.2 million shares, or 21%, in Indus. Airtel’s stake in the tower company will rise to 46.43%.