Kumar Mangalam Birla may invest at least $150 million into Vodafone Idea

Sources report that Aditya Birla Group chairman Kumar Mangalam Birla has come close to investing at least $150 million in Vodafone Idea from his personal assets.

Birla to Invest his Personal Assets in Vodafone Idea

A person aware of the matter said, "an issue of fresh convertibles or equities is being considered. Birla is likely to invest from his personal assets as early as this month". For the past few months, the telco has struggled under immense financial pressure. The move, if it goes through, will represent an emergency measure to keep the telco afloat.

One of the two people aware of the matter said that Birla's infusion will also help raise investor confidence in the telco. What's more, this capital will also give Vodafone Idea more room to work with, allowing them to launch new services to attract customers.

The person cited above also said that Vodafone Group will also look to invest a similar amount in Vi. Come March 2022, the telco might see around $1 billion invested via the two co-promoters. Vodafone Group will also plan to sell a part of its stake in Indus Towers, which it co-owns with Bharti Airtel.

On its own, the telco has been trying to raise as much as ₹25,000 crore from investors since September 2020. Over the past 14 months, the telco has had talks with PE investors, and even talks of selling a stake in the telco. However, talks stalled over the telco's threatened viability; Vodafone Idea made a note of telling that to the government, too.

The telco's fortunes seem to be changing since the government announced the telecom relief package in September. Vodafone Idea has opted for the 4-year moratorium on spectrum dues, as announced in the relief package. Among other things, the government has also allowed 100% FDI via the direct route, and redefined AGR to exclude non-telecom items.

Vodafone Idea's Dues

Currently, Vi's gross liabilities stand at about ₹1.9 trillion as of March 31. Along with statutory dues, the telco owes ₹48,000 crores to eight banks, led by SBI. Of this, borrowings amount to ₹23,000 crores, and the rest is in the form of bank guarantees. However, given that the government has reduced BGs to 20%, the dues to banks will reduce significantly.

The relief has sure helped Vodafone Idea a lot in the short to medium term. However, according to Motilal Oswal, it still needs capital infusion of around ₹12,000 crores to address cumulative liabilities till FY23. Along with this, the telco has to pay about ₹9,000 crore of loans to banks before the end of FY22. Though, after the moratorium ends, the telco's annual payments will almost double to ₹43,000 crores, from ₹24,800 crores. Also, the telco's statutory dues will grow from ₹1.6 trillion right now, to ₹2.2 trillion.

As such, the telco might go for the option to converting the debt to equity, which will see the government acquire a stake in the company; the Finance Ministry will soon notify of the guidelines for the same.