Vodafone Group Pledges Vodafone Idea Shares

Vodafone Plc. pledged its entire stake in Vodafone Idea Ltd. with seven banks after India’s largest telecom operator issued new stock to promoters to raise funds to pare debt.

Shareholders of Vodafone Promoter Mauritius and Vodafone Promoter Indian pledged about 44.39 percent stake, the company said in a filing. Vodafone Group owns the stake through 12 entities based in India and Mauritius. The stake is valued at close to Rs 18,304 crore.

The shares were pledged for “financing arrangements” in favour of HSBC Corporate Trustee Company (U.K.) Ltd. It’s acting as a trustee for BNP Paribas, HSBC Bank Plc, ING Bank N.V., Singapore Branch, Standard Chartered Bank, Bank of America Merrill Lynch and Morgan Stanley Senior Funding Inc.

In a response to a BloombergQuint query, Vodafone Plc. said the security arrangement facilitates the fund raising backed by India infrastructure and telecom asset. However, it did not comment on when it plans to release the pledged shares.

Vodafone Plc had mentioned in its 2018 annual report that incremental investment in India would come from Indus stake sale as its leverage was high. Indus Towers is in process of merging with Bharti Infratel Ltd. Post this merger, Vodafone Plc is likely to sell majority of its stake and the proceeds may be used to repay this debt.

The pledge was created on May 8, after the rights issue shares started trading on exchanges. Vodafone Idea had raised Rs 25,000 crore by issuing 2,000 crore new shares at Rs 12.5 each to shareholders, including Vodafone and Aditya Birla groups.

The wireless carrier’s shares have fallen more than 12.5 percent in the last two days.

Vodafone India Ltd. and Idea Cellular Ltd. merged their telecom units in August 2018 to fend off Mukesh Ambani-controlled Reliance Jio Infocomm Ltd. Vodafone Plc. and the Aditya Birla Group together control nearly 71 percent of Vodafone Idea.

(Corrects earlier version to update the number of shares issued by Vodafone Idea in the rights issue.)