Mumbai/New Delhi: Vodafone Idea is preparing to raise ₹20,000 crore from the markets through a follow-on public offer (FPO) likely as early as next week, said three people aware of the discussions the cash-strapped company was having with banks.
It is learnt to have appointed Axis Bank, Jefferies Financial Group, and State Bank of India as lead bankers for managing the share sale. Two of the people cited above said that a price band may be decided by early next week, which is likely to be at a discount to the current price. On Thursday, Vodafone Idea’s shares on BSE closed 1.4% lower at ₹13.36 apiece.
One of the persons cited above said that long-only investors are likely to come in as anchor investors in the follow-on offer. “The FPO will be followed by raising a larger level of debt from banks, which has long been contingent on their fundraise through equity,” the third person said. The three spoke on condition of anonymity, as they’re not permitted to speak to the media.
Queries to Vodafone Idea and SBI did not elicit a response till press time. Axis Bank and Jeffries Financial Group declined to comment.
A fundraise through the FPO will be the culmination of many attempts made by the loss-making telecom services provider that had first announced its intention to raise capital back in September 2020.
Vodafone Idea’s shareholders approved a ₹45,000-crore fundraising initiative, including the ₹20,000-crore equity-based capital infusion from existing investors, earlier this week. Existing promoters will be involved in the equity fundraise, the company had said earlier. Following the equity fundraise, Vodafone Idea will look to raise debt, taking the total amount of funding to up to ₹45,000 crore. It is expected to complete the fundraise by the end of June.
In a capital-intensive and cut-throat telecom sector, a lack of funding for three years has created several challenges for India’s third-largest carrier, including a persistent erosion in subscriber base and revenue. The fundraise is crucial for the company, which is saddled with a ₹2.1 trillion debt. It has not been able to pay a large portion of dues to its vendors, that amount to as much as ₹10,000 crore as per industry estimates. Its larger rivals Bharti Airtel and Reliance Jio have stolen a march over it in rolling out 5G services in the country.
Vodafone Idea chief executive officer Akshaya Moondra had said in earnings calls in previous quarters that the carrier was in discussions with multiple external investors, and that promoters were willing to put in more equity. While the talks with external investors appeared to have fizzled out, promoter equity infusion continues to be available to the telco.
The carrier’s board of directors will meet on Saturday to consider issuing equity or convertible securities of up to ₹2,075 crore, on a preferential basis, to one or more promoter group entities. Promoters had previously made a financial assistance of ₹2,000 crore available to the company for paying the annual installment against 5G spectrum bought in 2022.
The same year, Indian government became the single largest shareholder in the carrier after it converted interest on dues the company owed to the government amounting to ₹16,000 crore into equity.