Here’s what Kumar Mangalam Birla has to say on equity infusion into Vodafone Idea

In his first address to Vodafone Idea’s shareholders after taking over as the company’s non-executive Chairman last month, Kumar Mangalam Birla was optimistic on the way forward. This comes on the back of a challenging period that has seen Vodafone Idea dealing with high debt and a drop in market share.

Importantly, the shareholders at this extraordinary general meeting (EGM) approved promoter funding of ₹4,730 crore, through Suryaja Investments, a promoter-owned entity. This will be through equity-convertible warrants at ₹11 apiece. Of the ₹4,730 crore, ₹1,730 crore would be used for capex, while the balance of ₹3,000 crore will be for debt reduction.

“In my annual reflections, I had said tough times don’t last; tough companies do. Those words resonate more strongly with our company today,” Birla told Vodafone Idea’s shareholders. Maintaining that good times lay ahead, he did emphasise that there were challenges. “But I still believe that we are at a point of inflexion,” he added.

According to him, the work of rebuilding the company has begun. “Across operations, customer service and network expansion, the company is pursuing its priorities with discipline and purpose. The benefits of sustained investments in network and infrastructure and rollout are now becoming increasingly visible, reflecting a stronger operational performance and improved customer service,” he said.

The promoter funding will raise the group’s holding from 9.6% to 13%, post the conversion of warrants. All taken together, the combined stake of the promoters – Aditya Birla Group and Vodafone Group plc – will increase to 28%. In the process, the government’s holding will drop to 49% (it is at 47% now). The market reacted positively to the development, with the Vodafone Idea stock rising by over 5%.

Birla said the decision to infuse equity reaffirms the Aditya Birla Group’s belief in the long-term prospects of the company and continued alignment with the interests of all shareholders. “The focus will be now on execution,” he added.

The management of Vodafone Idea, last month, said it was deeply engaged with an SBI-led consortium for a ₹35,000 crore debt-funding package. The company’s CEO, Abhijit Kishore, at the company’s fourth quarter earnings call, expected to close the process “very fast.” Last March, the government converted ₹36,950 crore of deferred spectrum dues into equity, that increased its own holding.