Voda Idea may consider raising fresh funds to bolster its books

Synopsis

Vodafone Idea's board will meet on May 16 to discuss a significant fundraising plan, aiming to secure fresh capital through equity and warrants. This move is crucial for the debt-laden telco to strengthen its financial position, fund network upgrades, and compete effectively against rivals.

Mumbai: Vodafone Idea (Vi) Tuesday said its board will consider a fundraising proposal on May 16, as the debt-laden telecom operator seeks to bolster its balance sheet to continue operations and battle bigger rivals Reliance Jio and Bharti Airtel.

The company said in a regulatory filing that it would look to raise the fresh capital through an issuance of equity shares and/or warrants on a preferential basis.

The country's third-largest telco, which has laid out a three-year turnaround programme, is seeking a ₹25,000 crore term loan and another ₹10,000 crore in short-term working capital requirements.

Vi is targeting capital expenditure of ₹45,000 crore over the next three years to accelerate network upgrades, achieve 5G parity in key markets, and improve performance. This is in addition to the ₹18,000 crore it has already invested, which showed tangible results, according to the management.

The company is aiming for a double-digit annual revenue growth and to multiply its Ebitda by three times in three years. This will enable Vi to service its pending spectrum dues organically.

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A State Bank of India-led consortium is considering extending ₹25,000 crore debt funding to Vodafone Idea, ET had reported, signalling improved lender confidence in the telco after the government slashed its dues by 27%.

The Department of Telecommunications (DoT) last week reduced Vi's adjusted gross revenue (AGR) liabilities to ₹64,046 crore from ₹87,695 crore previously, in a major cash-flow relief. The bulk of the payments will now be staggered from FY36-41, effectively allowing a 10-year moratorium on Vi's liabilities and enough breathing room for the telco to invest in its networks.

Besides AGR, Vi also faces spectrum-related payments of ₹7,000 crore in FY27, ₹15,000 crore in FY28 and ₹28,000 crore in FY29.

Bankers who are in constant touch with Vi regarding its funding needs said the latest AGR development is positive for the company as it helps it to focus on investing in improving infrastructure rather than worry about government dues.

However, banks are still cautious on lending to the company given its challenging situation as it had ceded market share to its larger rivals.

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