Vodafone Group, Aditya Birla Group may infuse fresh equity into Voda Idea: Report

The Aditya Birla Group (ABG) and Vodafone Group Plc may infuse fresh capital by way of equity into their financially stressed Indian telecom venture, Vodafone Idea Limited (VIL), according to a Mint report.

The quantum of equity is not known yet.

This is a significant change in the stance of the promoters who had previously refused any fresh investment into the debt-laden telco citing “adverse regulatory and business environment”.

UK’s Vodafone Group and the ABG, hold ~44% and 27.66% stake in Vodafone Idea, respectively.

This comes close to the heels of the government’s recently announced reform measures for the ailing Indian telecom sector.

“There is a rethink among the two promoters around investing, although these are still early days,” one of the people aware of the matter told the publication. “The viability of Vodafone Idea has improved after the moratorium on adjusted gross revenue and spectrum charges were announced last week. The promoters feel bringing in fresh equity will add to investors’ confidence.”

A second person said raising equity at current valuations may lead to significant dilution of promoters. “A fresh round of equity will boost investor confidence, the promoters feel,” he said.

In 2019, both ABG and Vodafone had infused Rs 17,290 crore in VIL as part of the Rs 25,000 crore right issue.

Further, the troubled telecom company has been attempting to raise Rs 25,000 from investors but has yet to succeed.

VIL had been in discussions with US private equity (PE) firm Apollo Global Management to raise Rs 22,000 crore through a mix of debt and equity but the talks failed owing to concerns over the survival of the company.

Recently, Bharti Airtel chairman Sunil Mittal reached out to Vodafone Group chief executive Nick Read, urging him as well as Aditya Birla Group chairman Kumar Mangalam Birla to revive the beleaguered telecom company.

The telecom reform measures rolled out by the Union Cabinet on September 15 provide immediate cash flow relief to the financially burdened sector by way of deferring the adjusted gross revenue (AGR) as well as the spectrum dues for a period of four years. The definition of AGR has also been rationalized to excluded non-telecom revenues.

Telecom minister Ashwini Vaishnaw at a media briefing had said the companies availing deferment of dues will have to pay periodical interests. Companies have also been provided an option to convert the interest amount into equity to the government.

To this, brokerage firms have said that VIL could become a government entity after the moratorium period of four years in case it opts to pay the interest accruing over deferred AGR and spectrum payments by way of equity, and the government could end up owning a 26% stake in the telecom company.

“Per our calculations, the govt. could own 26% of VIL at the end of four-year period, if VIL chooses to pay the cumulative interest of Rs90bn over four years through equity, assuming shares are issued at CMP,” Jefferies has said.