Vodafone Idea Ltd said on Friday that it will increase to ₹25,000 crore. The board of the Birla group’s telecom operator approved the fundraising after obtaining clarity from the Supreme Court on the staggered payment of government fees earlier this week.
The board approved fundraising through two methods: by issuing shares through public issue, preferred allocation, private placement or qualified institutional placement (QIP) and through non-convertible bonds (NCD), the company said in an exchange statement. . Both fundraising routes have a limit of ₹15,000 crore each.
The proposed fundraising is subject to regulatory and shareholder approvals. Vodafone Idea will address the proposal at its annual general meeting on September 30.
“While the amount may appear below expectations, the fundraising process is likely to be gradual. This board-approved fundraising amount does not appear to limit any private equity actor from seeking a stake in Vodafone Idea. in the future, “said a telecommunications executive. analyst, requesting anonymity.
mint had previously reported, citing two people who were aware of the negotiations, that Amazon.com Inc. and Verizon Communications, the largest US mobile operator, are to resume negotiations to buy a significant stake in Vodafone. Idea, you are in debt. The stake sale talks were halted due to the Adjusted Gross Income (AGR) installment case.
On Tuesday, the Supreme Court granted telecommunications companies 10 years to pay AGR fees. The court ordered an advance payment of 10% of the total fees required by the Department of Telecommunications (DoT) before March 31. The rest will be paid in 10 installments equal to an interest rate of 8%.
According to telecommunications experts, Vodafone Idea needs new capital, higher fees, and concessions on various government taxes to continue operations, in addition to paying annual AGR fees that include spectrum usage charges, license fee, interest, fines and interest on fines. Voda Idea owes the government ₹58,254 crore.
The telecommunications operator needs the recapitalization of at least ₹70,000 crore, which is three times its market capitalization, to achieve a manageable liquidity position, analysts at Deutsche Bank Research said. “After that though, it would seem to offer value over its peers. We doubt that investors have that much appetite and that a partial recapitalization is more likely, “analysts said.
“Starting in fiscal year 23, Voda Idea must resume ₹Rs 15,500 crore auctioned in deferred spectrum fees. This includes the annual AGR payment of ₹8,000 crore, capex over ₹Rs 5 billion (to maintain telecom market share) and bank interest would total more than ₹Rs 30 billion, which is significantly higher than operating cash flows in the current Arpu, “IIFL Securities said in a report.
Analysts believe that Vodafone Idea will need more than double its average revenue per user (Arpu) to meet its AGR payment obligations. The Vodafone Arpu fell to ₹114 in the June quarter ₹121 in the fourth quarter of fiscal 2020.
In a post-earnings conference call for analysts, the administration said that Vodafone Idea’s fundraising plans were dependent on the higher court’s verdict and that the board will decide on the amount after the order is issued.
Vodafone Idea shares fell more than 4% to close at ₹12.01 on Friday, while the benchmark Sensex index was more than 600 points, or 1.6%, lower amid a global sell-off.
The higher court’s verdict, however, favors rival Bharti Airtel Ltd, which has provided in full the estimated AGR quotas at ₹43,980 crore.
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