Have commitments from anchor investors for $1 billion in equity, Voda-Idea tells banks

Vodafone Idea Ltd, which is looking to raise Rs 45,000 crore in equity and debt, has secured equity commitments from anchor investors exceeding $1 billion (Rs 8200 crore), people familiar with the development said.

The possible tying up of funds from a clutch of investors, the identities of whom could not be immediately ascertained, marks a crucial step forward for the telecom giant as it navigates its financial restructuring.

The company has met several foreign investment banks in the course of the past few weeks and has asked these banks to make presentations in this regard,” the first person said.

“In the interactions with lenders, the company has informed them that the equity commitment is in place from a clutch of marquee anchor investors, which will be the basis on which the debt component will be determined,” a second person said. “Additionally, Vodafone Idea has told investors that it has received assurances from domestic lenders for additional debt funding once the equity infusion is complete.”

Vodafone Idea has informally engaged a group of investment banks to devise efficient funding structures for the planned fundraising, the people said, requesting anonymity. The company, according to them, is looking to optimize its fundraising strategy by exploring various avenues, including the preferred method of equity fundraising. Options under consideration include a rights issue, preferential allotment, or a follow-on public offering.

“A preferential allotment will allow it to raise funding through a hybrid structure such as warrants, a rights issue or FPO will allow Vodafone Idea to price the new shares at a level deemed reasonable by the incoming investors as well existing shareholders,” one of the people cited above, a banker, said.

While Vodafone Idea continues to deliberate on its fundraising strategy, stakeholders closely monitor developments surrounding the company’s efforts. The outcome of Vodafone Idea’s fundraising efforts has significance not only for the company’s future trajectory but also for the broader telecom industry.

According to the Telecom Regulatory Authority of India’s (TRAI) data, Vodafone Idea lost 1.7 million subscribers in November 2023. The telco has been witnessing a decline of two to six million subscribers per quarter in the last few quarters due to the migration of subscribers to other telcos. Vodafone Idea’s overall user base was 215.2 million on December 31.

Without sufficient funds, there could be further erosion in Vodafone Idea’s customer base unless the company focuses on key circles to boost average revenue per user (ARPU).

In June last year, Vodafone Idea proposed to infuse Rs 14,000 crore by way of equity in the near term as part of its business revival plan. According to the plan submitted to the government, Vodafone Idea promoters, Aditya Birla Group and Vodafone Group Plc, offered to invest Rs 7,000 crore as fresh equity while proposing to raise another Rs 7,000 crore, either as direct equity or through convertible structures from external investors.