Vodafone Idea board to discuss fundraising issue tomorrow

Vodafone Idea (Vi) has said its board will meet on October 21 to consider raising funds by issuing preferential convertible debentures to a vendor.

Industry executives and analysts said this vendor could be Indus Towers, but this couldn't be independently confirmed by ET. Vi and Indus Towers did not respond to queries on the issue. Vi owes the tower company around ₹6,800 crore.

"A meeting of the board of directors of the company is scheduled on October 21, inter-alia, to consider and evaluate a proposal for issuance of debenture securities convertible into equity shares on a preferential / private placement basis to a vendor, subject to regulatory and other statutory approvals as may be required, including approval of the shareholders of the company," Vi said in an exchange filing.


Cash for Capex and to Clear Dues
Vi had first announced a Rs 25,000 crore fundraising plan via a mix of debt and equity in September 2020. Of this, it has received a shade over Rs 4,900 crore from promoters, bulk of which was used to clear some Indus dues. The balance funds are yet to be raised.

Both Vi and Indus shares rose 0.7% each on the BSE Wednesday, to end at Rs 8.52 and Rs 191.20, respectively.

The carrier, with around 253 million subscribers, needs cash to not just invest in 4G capex but also to tie up vendor contracts for 5G rollouts, for which it is under increasing pressure to clear its dues. The telco also owes Rs2,400 crore to another tower company, ATC. The US company didn't respond to ET's queries.

At September end, Vi owed over Rs 12,500 crore to vendors, including Indus and ATC. At June end, its net debt was over Rs 1.98 lakh crore while cash and cash equivalents were at Rs 860 crore.

If Vi issues convertible debentures to Indus Towers, industry executives said it could be a way for it to come up with a plan to clear a portion of its dues.

ET had reported on September 28 that Indus had warned Vi that it would cut its access to tower sites from November 2022 unless payments were made. To this, Vi told stock exchanges that it was in talks with Indus for "softer payment terms".

"Under current circumstances, such a payment mechanism would be a win-win for both companies as Vi gets more time to clear its dues while Indus possibly receives a mix of cash and debentures collateralised against a potential equity stake in Vi in future," said Rohan Dhamija, head (India & Middle East) at Analysys Mason.

He added that Indus could earn some periodic interest on debentures issued, which would improve its cash-flows.

Analysts said that it's also in Indus' interest to see that Vi continues to operate, else the tower company would be left with just one major tenant-Bharti Airtel.