Vodafone Idea will raise up to ₹25,000 crore by selling shares and taking loans

Kumar Mangalam Birla, Chairman, Aditya Birla Group and Idea Cellular Limited, and Mr. Vittorio Colao, CEO, Vodafone Group Plc at the Idea Vodafone merger press conference in MumbaiBCCL
  • Vodafone Idea’s board has approved fundraising of up to ₹25,000 crore by way of debt and equity.
  • The infusion of funds will allow the company to meet the adjusted gross revenue (AGR) obligations for the next two years, giving it room to breathe while it optimizes its operations and hikes tariffs.
  • The fundraising will give a boost to the telco’s balance sheet which is currently reeling under the burden of the AGR demand which stands at ₹50,339 crore.
  • Check out the latest news and updates on Business Insider.
Vodafone Idea has confirmed that it is raising up to ₹25,000 crore by way of selling shares and taking loans. In an exchange filing today, the struggling telecom company announced a fundraising of ₹15,000 crore, with an upper limit of ₹25,000 crore.

In an exchange filing, Vodafone Idea stated that its board has approved fund raising of up to ₹15,000 crore through equity shares or debentures. The sale of equity shares can be through either public offer or private placement, leaving the window open for other companies to acquire a stake in the company. This comes at a time when companies like Google, Amazon and Verizon have been reportedly planning to invest in Vodafone Idea.

The regulatory filing also states that the total fundraising has been capped at ₹25,000 crore, but the maximum amount that will be raised via loans is capped at ₹15,000 crore. The remaining, if any, will be done via sale of equity shares.

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The struggling telco needs a combination of tariff hikes, government support and fund raising to survive beyond the current year.

According to a report by Jefferies Equity Research, dated September 1, Vodafone Idea could require up to ₹18,800 crore by the end of March 2023. To do so, it will need to raise money since its existing operating profit is less than annual payments that will be due.

Particulars Amount Liabilities Amount
Free cash flow ₹2,500 crore Annual AGR obligation ₹7,844 crore
Operating profit (annualised) ₹6,100 crore
Cost savings from Vodafone-Idea merger ₹4,000 crore
Source: Company reports, Jefferies Equity Research
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Note: Annual AGR dues computed with an assumption of 9% interest rate per annum.

But beyond FY21, the cash gap will widen to ₹4,200 crore and by FY23, it will balloon to ₹18,800 crore, the report states.

Now that it has announced fundraising, the second option for Vodafone Idea is to announce tariff hikes. The Jefferies report suggests that a minimum 10% hike in tariffs is to be expected, but Vodafone Idea needs as much as 27% hike to cover its cash flow needs.
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SEE ALSO:

Vodafone Idea may need up to ₹18,800 crore in next two years and tariff hikes to survive, says a new report

Supreme Court directs Airtel, Vodafone Idea and others to pay AGR dues over 10 years
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The AGR verdict could lead to a Reliance Jio and Airtel duopoly in the Indian telecom sector

Only cash can save Vodafone Idea from a slow death