Vodafone Idea gets shareholders' nod to raise ₹20,000 cr

Vodafone Idea share surged 2.38% to hit the day's high of ₹13.98 on the BSE after the telco’s shareholders approved ₹20,000 crore fundraising plan via a combination of equity and equity-linked instruments.

In its shareholder meeting report, released today via an exchange filing, Vodafone Idea says a “special resolution” for the issuance of securities worth ₹20,000 crore was favoured by the number of voting members.

Vi's board had conducted an extraordinary general meeting (‘EGM’) on Tuesday via video conferencing/other audio-visual means.

The shareholder approval comes following Vi board’s nod for the ₹20,000 crore fundraising plan on February 28, 2024. It had authorised the management to appoint various intermediaries, including bankers and counsels to execute the fundraising. Besides, Vi is also looking at raising around ₹15-20,000 crore via a follow-on issue, for which the board had given approval in February. The company says through a combination of equity and debt, it aims to raise a total of ₹45,000 crore.

The telecom company has said it remains “actively engaged” with its lenders for tying up the debt funding, which will follow the equity fundraising. The equity and debt fundraising will enable the company to make investments towards significant expansion of 4G coverage, 5G network rollout and capacity expansion.

According to Vi, these investments will enable it to improve its competitive positioning and offer an even better customer experience.

In Q3 FY24, telecom major Vodafone Idea saw its net loss narrowing to ₹6,985 crore as against ₹7,990 crore loss in the same period last year. The average revenue per user (ARPU) of the company rose 7.5% year-on-year to ₹145 from ₹135 in Q3 FY23.

As the company’s moratorium ends in FY26, the company’s annual obligation will be ₹43,000 crore vs EBITDA of ₹8,400 crore, presenting a significant risk, say analysts.

Notably, Vi’s funding plan had been pending for a long time. Its promoters had earlier infused ₹4,500 crore (in Mar’22) to settle dues with Indus Tower and fulfill non-convertible debentures (NCD) repayment commitments.

The government had converted the interest related to the four-year moratorium on deferred spectrum and AGR liability into equity.

The company still holds a debt of ₹2,10,000 crore, with an annual instalment of ₹43,000 crore from FY26 onwards. “This looks challenging against FY24 EBITDA (IND-AS 116) of ₹8,400 crore,” says brokerage Motilal Oswal in its February report, adding that the capex directed toward the rollout of 4G and 5G holds significant importance. It says the much-awaited capital raise is crucial, as it is essential to ensure “immediate liquidity and facilitate the expansion of the network”.

Motilal Oswal said the absence of these investments posed a risk for Vodafone Idea, causing a shift of its premium subscribers to Bharti/RJio networks and adversely impacting VIL’s network capability, consequently leading to elevated customer churn.