Vodafone Idea’s board approved a Rs 45,000 crore fundraising plan for 4G and 5G expansion. The initiative includes Rs 20,000 crore through equity, involving external investors. Promoters, including Aditya Birla Group, committed Rs 2,000 crore. Analysts anticipate stock pressure despite improved metrics. The company, facing losses, aims to bolster competitiveness and enhance customer experience through the fund infusion (Vodafone Idea Targets).
On Tuesday, Vodafone Idea’s board approved a proposal to raise Rs 45,000 crore through a combination of equity and debt.
The company intends to utilize these funds to expand its 4G coverage, deploy a 5G network, and enhance its overall capacity (Vodafone Idea Targets).
The fundraising initiative involves generating Rs 20,000 crore through a mix of equity and equity-linked instruments, with plans to bring in an external investor as early as the next quarter. Discussions with potential external investors are reportedly in advanced stages, according to a company insider.
The board has approved the management to engage bankers, counsel, and advisers for the implementation of the fundraising plan.
The equity portion may be raised through diverse avenues such as convertible debentures, warrants, global depository receipts, American depository receipts, and foreign currency convertible bonds.
These could be issued through various methods, including a public offer, private placement, preferential issue, or a qualified institutional placement, as stated by the company.
A shareholders’ meeting is scheduled for April 2 to seek approval for the completion of the equity fundraising (Vodafone Idea Targets).
Vodafone Idea’s promoters, including the Aditya Birla Group, are set to participate in the proposed equity raise, committing Rs 2,000 crore since August of the previous year.
Presently, the Aditya Birla Group holds 18.1% of the company, the Indian government owns approximately 33%, and the UK’s Vodafone Group possesses a 32.3% stake (Vodafone Idea Targets). Notably, the UK-based firm had previously declined further financial injections into the Indian company.
Furthermore, the company is currently in discussions with lenders to secure debt funding, which is expected to follow the equity fundraising. The company has clarified that its current bank debt is below Rs 4,500 crore.
“The company stated in a release that these investments will enhance its competitive standing and contribute to an improved customer experience,” the telecommunications company remarked. Vodafone Idea’s shares concluded Tuesday with a 6% decline, closing at Rs 16 per share, resulting in a total market valuation of Rs 77,254 crore.
Analysts anticipate potential pressure on the stock on Wednesday, as the market had expected an announcement of new investments, which was not realized.
Despite similar resolutions in the past, an analyst noted that for the long term, the involvement of promoters in the proposed equity raise is positive (Vodafone Idea Targets).
Analysts anticipate that these investments will fortify the company’s competitive position in the telecom sector, leading to an enhanced customer experience and market share growth.
Prashanth Tapse of Mehta Equities remarked, “We believe the stock has already factored in the fundraising development, and thus, we may observe limited upside up to Rs 17-18 per share in the best-case scenario. Following this news, in terms of price action, we maintain a neutral stance on this development.”
The proposed fundraising initiative comes on the heels of notable improvements in operating metrics for Vodafone Idea, showcasing growth in its 4G subscriber base and average revenue per user (ARPU) over the past 10 quarters, as highlighted by the company (Vodafone Idea Targets). It emphasized its ongoing commitment to delivering competitive data and voice experiences across all its locations.
Despite reporting a net loss of Rs 6,985 crore in the December quarter, marking a 12.5% decrease from Rs 7,990 crore in the corresponding quarter of the previous fiscal year, the company has demonstrated consistent performance improvement even with limited investments.
Vodafone Idea acknowledges the ongoing challenge of losing customers to competitors like Reliance Jio and Bharti Airtel, ending the December quarter with 4.6 million fewer subscribers (Vodafone Idea Targets). The overall subscriber base as of December last year was reported at 215.2 million.
In a sequential comparison, the company’s net loss decreased by 20%, reaching Rs 8,737 crore from the previous quarter’s Rs 8,737 crore (Vodafone Idea Targets). Despite this improvement, the telecom firm experienced an increase in finance costs, rising to Rs 6,493 crore from Rs 6,284 crore in the corresponding quarter of the previous year.
An analyst noted, “Capital expenditure for the rollout of 4G and 5G-based telecom networks is of significant importance. The much-anticipated capital raise is crucial to ensure immediate liquidity and facilitate network expansion.”
