Vodafone Idea Plans To Raise Rs 25,000 Crore

Vodafone Idea Ltd. plans to raise close to Rs 25,000 crore, the bulk of it coming from promoters of India’s largest telecom operator—Vodafone Group Plc and the Aditya Birla Group.

Vodafone Idea, which has a market capitalisation of close to Rs 36,200 crore, is looking to raise funds by issuing fresh shares, according to its exchange filing. This could include a rights issue, qualified institutional placement and/or preferential issue. The infusion, if approved by the board, is expected to be completed by March.

While the company didn’t mention the purpose of fundraising, an analyst told BloombergQuint requesting anonymity that it would help it pare its debt of Rs 1,12,500 crore.

Vodafone Group and the Aditya Birla Group would contribute Rs 11,000 crore and Rs 7,250 crore, respectively, according to the statement. The rest could be raised from public. Grasim Industries Ltd. and Hindalco Ltd. are the two listed Aditya Birla Group companies that hold stake in Vodafone Idea, with Grasim Industries holding 11.6 percent and Hindalco with 2.6 percent stake.

The fresh infusion would expand the equity base of the company by 41 percent, according to BloombergQuint’s calculation.

The company is also considering the sale of its fibre assets.

This would be the second fund infusion by promoters to pare debt. Earlier this year, Vodafone and Aditya Birla Group infused close to Rs 14,140 crore in their respective telecom operations to pare debt for the merger to go through. The companies started combined operations from Sept. 1, a consolidation that stemmed from the tariff war triggered by Reliance Jio Infocomm Ltd.

The proposed fund infusion would lower their leverage ratio, one of the key conditions for the merger, according to the terms of the agreement. The entity’s net debt is 24 times its earnings before interest, tax and depreciation and amortisation, according to BloombergQuint calculations. That’s higher than that of Bharti Airtel Ltd. and Reliance Jio. It would stay at an elevated level despite the proposed fund infusion.

Vodafone Idea also reported its first quarterly numbers after the merger—the financials are not comparable with previous earnings.

Key Highlights

• Revenue stood at Rs 7,664 crore.
• Net loss at Rs 4,974 crore.
• Ebitda at Rs 461 crore.
• Ebitda margin at 6%.
• Average revenue per user at Rs 88.

The joint entity had vacated some towers, post the merger, but tower companies have subsequently raised demands for Rs 3,000 crore. The company says its hopeful of settling such claims for not more than Rs 1,000 crore.