Shares of Vodafone Idea fell over 4% to close at ₹12.01 on Friday (Photo: Priyanka Parashar/Mint)
- Vodafone Idea will take up the proposal at its annual general meeting on 30 September
- Analysts believe that Vodafone Idea will need to more than double its average revenue per user (Arpu) to meet its AGR repayment obligations
Vodafone Idea Ltd on Friday said it will raise up to ₹25,000 crore. The board of the Birla group telecom operator approved fundraising after getting clarity from the Supreme Court on staggered payment of government dues earlier this week.
The board approved fundraising through two methods—by issue of equity shares via public issue, preferential allotment, private placement or qualified institutional placement (QIP), and through non-convertible debentures (NCDs), the company said in an exchange filing. Both routes of fundraising have a limit of ₹15,000 crore each.
The proposed fundraising is subject to regulatory and shareholders’ approvals. Vodafone Idea will take up the proposal at its annual general meeting on 30 September.
“While the amount may seem lower than expectations, the fundraising process is likely to be gradual. This fundraise amount approved by the board does not seem to limit any private equity player from seeking a Vodafone Idea stake in the future,” said a senior telecom analyst, requesting anonymity.
Mint had earlier reported, citing two people aware of the negotiations, that Amazon.com Inc. and Verizon Communications, the largest wireless carrier in the US, are set to resume talks to buy a significant stake in debt-ridden Vodafone Idea. The stake-sale talks were paused because of the case related to the adjusted gross revenue (AGR) dues.
The Supreme Court on Tuesday granted telcos 10 years for payment of AGR dues. The court ordered an upfront payment of 10% on the total dues as demanded by the department of telecommunications (DoT) by 31 March. The remaining shall be paid in 10 equal instalments at an interest rate of 8%.
According to telecom experts, Vodafone Idea needs fresh equity, higher tariff and concession in various government levies to continue operations besides paying the annual instalment of the AGR dues that include spectrum usage charges, license fee, interest, penalty and interest on penalty. Voda Idea owes the government ₹58,254 crore.
The telecom operator needs recapitalisation of at least ₹70,000 crore, which is three times its market capitalisation, to reach a manageable liquidity position, said analysts at Deutsche Bank Research. “After that, however, it would appear to offer value over its peers. We doubt that investors have such appetite and that a partial recapitalisation is more likely,” the analysts said.
“From FY23, Voda Idea will need to resume ₹15,500 crore auctioned spectrum deferred instalments. This including annual AGR payment of ₹8,000 crore, capex of over ₹5,000 crore (to maintain telecom market share) and bank interest would total over ₹30,000 crore, which significantly is higher than operating cash flows at current Arpu,” IIFL Securities said in a report.
Analysts believe that Vodafone Idea will need to more than double its average revenue per user (Arpu) to meet its AGR repayment obligations. Vodafone’s Arpu fell to ₹114 in the June quarter from ₹121 in the fourth quarter of fiscal year 2020.
In a post-earnings conference call for analysts, the management had said Vodafone Idea’s fundraising plans hinged upon the apex court’s verdict and the board will decide on the quantum after the order is pronounced.
Shares of Vodafone Idea fell over 4% to close at ₹12.01 on Friday, while the benchmark Sensex settled over 600 points, or 1.6%, lower amid global sell-off.
The apex court’s verdict, however, favours rival Bharti Airtel Ltd, which has fully provided for the AGR dues estimated at ₹43,980 crore.Subscribe to newsletters