Vodafone Idea on Friday determined to bring up to Rs 25,000 crore by means of share sale and debt from new investors even as its UK parent has deliberate to stay aloof.
A spokesperson for Vodafone plc said: “Our position has not changed.
Vodafone Group does not intend to put any fairness into Vodafone Idea.”
Vodafone Idea is owned by Vodafone plc and the Aditya Birla group (ABG).
In a assembly here, the board of directors of the company determined to bring the funds via fairness share sale of up to Rs 15,000 crore and another tranche of up to Rs 15,000 crore via a public offer or private placement of non-convertible debentures. On the other hand, the complete will not exceed Rs 25,000 crore, the company said in a remark to the inventory exchanges.
Both the proposals will be taken up at the once a year general assembly, scheduled for September 30.
The company’s promoters are in talks with US-based investors. Nothing concrete has emerged, said sources.
Telecom analysts said the extra funds would help the company tide over its instant crisis because both Vodafone plc and the ABG had refused to infuse extra money into the loss-making venture.
“It’s a transitory reprieve for the company,” said an analyst with an Indian brokerage.
Vodafone Idea’s Ebitda (earnings before interest, depreciation, tax, and amortisation) of Rs 4,100 crore in the June quarter of FY21 used to be not enough to pay for its capex, interest, deferred spectrum, and the adjusted gross revenue (AGR) dues, all of which amount to over Rs 30,000 crore yearly.
This includes AGR dues of Rs 7,500 crore yearly.
It’s going to, on the other hand, have some leeway in FY21 and FY22, when, thanks to the moratorium on paying for deferred spectrum (offered by the government), its normal payouts would be lower (deferred spectrum is Rs 14,000 crore per annum).
But Vodafone Idea has to pay more yearly after the two years.
Based on the first-quarter FY21 numbers, almost 45 per cent of Vodafone Idea’s Ebitda would be used to pay just its AGR dues.
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And Goldman Sachs estimates its Ebitda needs to go up 4.9x over Q1 FY21 and its average revenue per user (ARPU) by over by 88 per cent (its ARPU in the June quarter used to be Rs 123) for it so that you can just make its annual outflows.
On the other hand, with its debt at 10 times its Ebitda on an annualised basis, it has had no choice but to bring money through fairness.
It’s going to get around Rs 4,000 crore by selling its stake in Indus Towers to Bharti Airtel. On the other hand, monetising fibre assets won’t earn for it a large amount of money.
Also the company will wish to up its capital investment in order that it can bridge the hole it has with its rivals in upgrading its 2G network to 4G. On the other hand, the company’s capex previously 12 months has been down by 25 per cent year on year and lower by 50 per cent over that of Bharti Airtel.
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“The extra debt will increase the financing cost for the company. So it is going to require more funds,” the analyst said.
Fund raisingcomes at a time when the company is fighting Reliance Jio and Bharti Airtel toretain its market share.
The company used to be hit tough by the Supreme Court ruling in October final year, when it used to be asked to pay Rs 58,254 crore of AGR dues to the government. On the other hand, on Tuesday, the court gave 10 years to the entire telecom companies to pay their past dues. Vodafone Idea has paid Rs 7,854 crores as AGR to the Branch of Telecommunications.
The share price of Vodafone Idea had reacted positively since the court’s latest order but on Friday it closed 4.3 per cent lower at Rs 12 a share – giving it a market valuation of Rs 34,511 crore.
In the first quarter of the financial year, Vodafone Idea’s quarterly loss increased to Rs 25,460 crore as in comparison to Rs 11,643 crore reported in the March quarter of FY20.