Loan for Vodafone Idea: Banks to check liabilities repayment schedule first

Telecom company Vodafone Idea needs to raise about Rs 25,000 crore through loans

Notwithstanding the successful follow-on public (FPO) offer, cash-strapped Vodafone Idea (Vi) may face some difficulties in raising funds as commercial banks will first look into the telco’s liabilities and their repayment schedule over the next 4-5 years before deciding on extending loans.

According to a top official from a large public sector bank, lenders will need comfort that the telecom player will be in a position to repay debt before taking a decision on extending loans. The company will need to raise about Rs 25,000 crore through loans.

“Earlier we said the company needs to raise equity first before banks extend loans. Now they have raised the funds. But we need to see the repayment schedule of their liabilities,” the official said on the condition of anonymity.
 

“It should not happen that they are unable to repay bank loans due to other liabilities,” the official said, adding that concerns over Vi’s declining market share are still there.

Queries mailed to Vi did not elicit a response till press time.

In March, Vi shareholders had approved a plan to raise funds worth Rs 45,000 crore, through both equity and debt. Of this, Rs 18,000 crore have been raised through the company’s recently concluded follow-on public (FPO) offer, India's largest so far. Concluding on Monday, the FPO received a healthy response from investors and was subscribed 6.4 times.

At the end of third quarter of FY24 (October-December), Vi had an enormous total gross debt excluding lease liabilities of Rs 2.14 Trillion.

However, in a major respite for the telco, the debt from banks and financial institutions reduced by Rs 7,140 crore to Rs 6,050 crore at Q3-end, down from Rs 13,190 crore a year ago. 

Despite this, the company is staring at the repayment of Rs 5400 crore worth of debt in 2024.

Going forward, the company has to pay Rs 12,000 crore to the government between October, 2025 and March, 2026, taking into account both principal and interest. Subsequently, it needs to pay Rs 43,000 crore annually for five years, or from FY27 till FY31.

Currently, the government is Vodafone’s largest creditor, owning 33.4 per cent equity stake post the conversion of the company’s interest dues worth Rs 16,000 crore. The interests had piled up as a result of its deferred adjusted gross revenue (AGR) and spectrum instalments.

Last week, Vi CEO Akshaya Moondra said the telco may have the option to further convert dues owed to the government into equity.

Vi continues to engage with lenders for further debt fundraising as well as with other parties for equity or equity-linked fundraising, an industry executive said under conditions of anonymity.

The fundraising remains crucial for the telco’s plans for network expansion, including for its anticipated 5G rollout. In March, Vi executives met institutional investors in Singapore and Mumbai.

The company had last raised Rs 25,000 crore ($3 billion) in May 2019 through a rights issue, including Rs 17,920 crore ($2.2 billion) contributed by the promoter group. The promoter group had also invested a further Rs 4900 crore ($600 million) in 2022.