Vodafone Idea Fundraise: Experts on Completion Key
Feb 28, 2024 21:52
Vodafone Idea's announced Rs 45,000 crore fundraise is seen as positive, but experts question its completion, with past attempts failing. The company plans to use the funds for 5G rollout and 4G services.
New Delhi, Feb 28 (PTI) Telecom operator Vodafone Idea's announcement of Rs 45,000 crore fundraise through a mix of equity and debt is directionally positive but completion will be key, according to experts.
Citi, in a note, said given past unsuccessful fundraise attempts, the question on top of investors' minds will be "is it different this time?"
The VIL board approval for raising up to Rs 20,000 crore in equity from promoters and other investors by June is "ahead of estimates" and "positive for sentiment" but completion is key, it said.
"Completion is undoubtedly key", Citi said, adding that it believes the latest development could nonetheless be positive for both Vodafone Idea and Indus Towers in the near term.
"Whilst further details are still awaited, we are enthused by the announcement, which suggests a concrete fundraise plan may be in place with specific timelines," Citi said.
Stating that the VIL's announcement of the fundraise was similar to its declaration in September 2020, CLSA said, "VIL has been in talks with potential investors, but fundraising is still pending".
The brokerage said it expects financial crunch for Vodafone Idea going forward, at the point when annual spectrum and AGR payments to the government of USD 4 billion per annum (3x of current cashflows) become due, unless the government does conversion of principal debt to equity at the end of the moratorium.
Over 12 months, Vodafone Idea has lost 120 basis points revenue market share to 15.6 per cent versus gain of 50-90 basis points share by Reliance Jio and Bharti Airtel.
"We retain our SELL rating on VIL with Rs 5 target price with falling share, pending fundraising and AGR relief," CLSA said.
Struggling telecom firm Vodafone Idea on Tuesday said its board has approved raising up to Rs 20,000 crore in equity from promoters and other investors by June as it looks to shore up finances for much delayed 5G rollout and strengthening 4G services.
VIL, however, stopped short of naming any new investor, and it also did not specify how much the promoters inject as capital into the company.
The debt-laden firm, where the government also holds just over 33 per cent equity stake, plans to raise Rs 45,000 crore through a mix of equity and debt with hopes of matching services offered by rivals Jio and Bharti Airtel that could arrest subscriber churn.
The fundraising, when it happens, will also arm Vodafone Idea with firepower to improve competitive positioning in the Indian telecom market, where it trails larger rivals Reliance Jio and Bharti Airtel, by a wide margin.
Vodafone Idea has been fighting a desperate battle for survival -- it has a debt of Rs 2.1 lakh crore, is reporting quarterly losses, and haemorrhaging subscribers month after month.
At the last count, Trai data showed VIL had lost 13.6 lakh subscribers in December, and that its subscriber base had shrunk to 22.30 crore.
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