Vodafone Idea Approves Rs 20,000 Cr Fundraise for 5G Rollout

New Delhi, Feb 27 (PTI) 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 roll out and strengthening 4G services.

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.

On Tuesday, Vodafone Idea said its board has approved fundraise of up to Rs 20,000 crore via a combination of equity and/or equity-linked instruments, but stopped short of naming any new investor.

It also did not specify just how much would the promoters inject as capital into the company.

The VIL board has also authorised the management to appoint bankers and counsel to execute the fundraise.

VIL will call for a meeting of its shareholders on April 2, 2024 and post-shareholder nod it expects to complete the equity fund raise in the coming quarter.

The promoters will also participate in the proposed equity raise, as committed earlier, the company promised.

The board at its meeting approved "raising of funds by way of issue of Equity Shares or by way of issue of any instrument or security, including convertible debentures, warrants, or other securities convertible into equity shares".

The instruments approved included Global Depository Receipts, American Depository Receipts or Foreign Currency Convertible Bonds or by way of a composite issue of non-convertible debentures with or without warrants entitling the warrant holder(s) to apply for equity shares or any combination thereof for an aggregate amount of up to Rs 20,000 crore, the filing stated.

This would be by way of a further public offer, private placement, including preferential issue, qualified institutions placement, or through any other permissible mode in one or more tranches, the filing said.

VIL board has authorised the capital raising committee to evaluate and decide the potential route of fundraising.

In a release, the company said it remains actively engaged with its lenders for tying up the debt funding, which will follow the equity fundraise.

Through a combination of equity and debt, the company plans to raise around Rs 45,000 crore.

Voda Idea said its bank debt stands at less than Rs 4,500 crore.

"The equity and debt fund raising will enable the company to make investments towards significant expansion of 4G coverage, 5G network rollout and capacity expansion," the release added.

These investments will enable the company to improve its competitive positioning and offer an even better customer experience.

"The company has consistently shown an improvement in performance even with limited investments. With the proposed fundraise and the positive operational developments, the company is confident of effectively competing in the market," it added.

Last week, billionaire industrialist and Aditya Birla Group Chairman Kumar Mangalam Birla underlined the group's firm commitment to the cash-strapped telco and asserted that efforts are on to rope in external investors.

VIL has been struggling to raise capital for the past several quarters, with the cash crunch impacting its ability to invest, expand and even settle vendor dues. Its woes have been compounded by continuous loss of subscribers.

The government is now the biggest shareholder in the company after it allowed VIL to convert dues of around Rs 16,000 crore into equity.

The government holding in VIL is pegged at 33.1 per cent after it converted the accrued interest towards statutory dues into equity in 2023.

Vodafone Plc and Aditya Birla Group hold a total of 50.3 per cent in VIL.

Aditya Birla Group, which is one of the promoters of the telco, holds around 18 per cent stake in VIL, while British telecom giant Vodafone Group owns 32 per cent stake.

As of December 2023, the total debt of the group stood at Rs 2,14,964 crore, which is the highest among all other telecom firms in the country.

Vodafone Idea saw its net loss narrow to Rs 6,986 crore for the December quarter, helped by Rs 755.5 crore one-time exceptional gain, while the average revenue per subscriber improved. VIL's net loss stood at Rs 7,990 crore in the year-ago period.

The telecom firm during its recent earnings call had said it will need 6-7 months to roll out 5G services after securing funding, for which discussions with investors are underway.

Vodafone Idea CEO Akshaya Moondra during the company's earnings call said the telco is in discussion with various vendors for the 5G rollout as well as developing use cases.