On Friday, Vodafone Idea decided to raise up to 25 billion rupees through the sale of shares and debt from new investors, even as its UK parent has planned to stay away.
A spokesperson for Vodafone plc said: “Our position has not changed.
Vodafone Group does not intend to invest capital in Vodafone Idea ”.
Vodafone Idea is owned by Vodafone plc and the Aditya Birla Group (ABG).
At a meeting here, the company’s board of directors decided to raise funds by selling equity shares of up to Rs 15,000 crore and another tranche of up to Rs 15,000 crore through a public offering or private placement of non-convertible bonds. However, the total will not exceed 25 billion rupees, the company said in a statement to the stock exchanges.
Both proposals will be considered at the annual general meeting, scheduled for September 30.
The company’s promoters are in talks with US investors. Nothing concrete has emerged, sources said.
Telecoms analysts said the additional funds would help the company overcome its immediate crisis because both Vodafone plc and ABG had refused to inject additional money into the loss-making company.
“It is a temporary respite for the company,” said an analyst at an Indian brokerage.
Vodafone Idea’s Ebitda (earnings before interest, depreciation, taxes and amortization) of Rs 4,100 crore in the June quarter of fiscal year 21 was not enough to pay its capex, interest, deferred spectrum and gross income installments Adjusted (AGR), all of which amount to more than Rs 30 billion annually.
This includes AGR fees of Rs 7.5 billion per year.
However, you will have some leeway in Exercises 21 and 22, when, thanks to the moratorium on the payment of deferred spectrum (offered by the government), your normal payments would be lower (the deferred spectrum is 14 billion rupees per year).
But Vodafone Idea has to pay more annually after two years.
According to figures for the first quarter of fiscal year 21, almost 45 percent of Vodafone Idea’s Ebitda would be used to pay only its AGR fees.
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And Goldman Sachs estimates that its Ebitda must increase 4.9 times during the first quarter of fiscal 21 and its average revenue per user (ARPU) by more than 88 percent (its ARPU in the June quarter was 123 rupees) for that you can simply do your yearly outings.
However, with his debt at 10 times his Ebitda on an annualized basis, he has had no choice but to raise money through stocks.
He will earn around Rs 4 billion by selling his stake in Indus Towers to Bharti Airtel. However, monetizing fiber assets may not generate a large amount of cash.
In addition, the company will need to increase its capital investment in order to close the gap it has with its rivals in upgrading its 2G network to 4G. However, the company’s capex over the past 12 months has dropped 25% year-on-year and 50% more than that of Bharti Airtel.
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“The additional debt will increase the cost of financing the company. Then it will require more funds, “said the analyst.
The fundraiser comes at a time when the company is battling Reliance Jio and Bharti Airtel to retain their market share.
The company was hit hard by the Supreme Court ruling in October last year, when it was asked to pay Rs 58,254 million of AGR fees to the government. However, on Tuesday, the court gave all telecommunications companies 10 years to pay their past dues. Vodafone Idea has paid Rs 7,854 crore as AGR to the Department of Telecommunications.
Vodafone Idea’s share price had reacted positively since the last court order, but on Friday it closed 4.3% lower at 12 rupees a share, giving it a market valuation of 34.511 crore rupees.
In the first quarter of the financial year, Vodafone Idea’s quarterly loss increased to Rs 25,460 crore compared to Rs 11,643 crore reported in the March quarter of FY20.
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