Vodafone Idea to Lenders: Can Raise $1 Bn by June

Vodafone Idea assured its lenders that will complete its fundraising, by the end of June. Sources report that the telco also said that it won’t default on any upcoming payments.

Vodafone Idea's Fundraising Exercises

Vodafone Idea received a relief as one of their local lenders extended a bank guarantee of Rs 1,420 crore by another year. The telco plans to use this to clear its remaining dues to the government for 4G spectrum acquired in March. Incidentally, Vodafone Idea bought paid Rs 574.65 crore upfront out of Rs. 1,993.4 Crore for the total transaction.

However, there are still concerns over the telco's plans to raise Rs. 25,000 crore, announced back in September. The telco was unable to conclude any deals till then.

The list of potential investors include an Oak Hill-led consortium, US private equity firms including KKR. The telco also contacted pension funds recently, which included Canada Pension Plan Investment Board, Caisse de Dépôt et Placement du Québec and Norway’s Government Pension Fund Global.

Industry experts note that with Vodafone Idea's weak financial situation and continued loss of users, fundraising has proved to be challenge. Potential investors want the co-promoters - Vodafone Plc and Aditya Birla Group - to infuse capital in the telco as well. However, both the promoters are adamant to not put any equity in the telco whatsoever.

The only reprieve for Vi comes from the fact that local lenders are willing to give the telco more time. Come FY23, the telco has annual spectrum-related payments to worry about. Its annual spectrum payment instalments of about Rs. 15,500 crore would start from FY23, once the two-year moratorium ends.

The list of local lenders include SBI, PNB, IndusInd Bank, ICICI Bank, Yes Bank, IDFC Bank and HDFC Bank.

Vodafone Idea Tightroping a Thin Line

As of December 31, 2020, loans falling due beyond 12 months amounted to Rs. 8,691.9 crore, as per Vi's third-quarter earnings notes. It added that “guarantees amounting to Rs 11,371.6 crore are due to expire during the next 12 months and Rs 872.7 crore of incremental guarantees are to be provided.”

There are a few critical points on Vi's To-Do list. First, the telco needs to raise cash to bolster its 4G operations, as they can't raise tariff. The telco needs to do so in 16 priority circles to fight its financially stronger rivals Bharti Airtel and Reliance Jio.

Second, in needs to somehow check its steady loss of mobile users.

Third, and most importantly, it needs to clear its statutory dues to the government. It has Rs. 50,400 crore of AGR dues payable to the government over 10 annual instalments through March 31, 2031.