Vodafone Idea shares gain amid $3.5 billion SBI-led debt financing report

Shares of Vodafone Idea Ltd rose 2 per cent in Friday's trade after a report suggested that a group of lenders led by State Bank of India (SBI) has agreed to offer about $3.5 billion of debt financing to the telecom operator. The move could help Vodafone Idea rebuild its business, people familiar with the matter told Bloomberg. Business Today could not independently verify the report.

Union Bank of India Ltd and the National Bank for Financing Infrastructure and Development are also part of the lender consortium, according to the report. The sources spoke on condition of anonymity as the information is not public.

Vodafone Idea shares opened at Rs 15.10. It touched a high of Rs 15.20, marking a rise of 1.60 per cent. The scrip had fallen 3.99 per cent in the previous session.

The country's third-largest wireless operator by subscribers plans to use some of the funds to strengthen its network and compete more effectively with Bharti Airtel Ltd and Reliance Jio Infocomm Ltd, the report said.

The proposed financing reportedly comes with conditions, including Kumar Mangalam Birla remaining chairman throughout the nearly 10-year tenure of the loan. The terms also include guarantees for repayment in the event of a default, according to the sources. Business Today could not independently verify the report. Representatives for Vodafone Idea and the lenders did not immediately respond to requests for comment, Bloomberg reported.

To recall, Jefferies this week described Vodafone Idea as a "high beta turnaround play". The brokerage said the recent Rs 25,000 crore debt raise would be sufficient to tide over FY27-29, but estimated that the company would require a further Rs 16,000 crore equity infusion in FY30. This would also trigger the conversion of spectrum liabilities worth Rs 15,300 crore into equity by the government.

"This shall be sufficient to cover the cashflow shortfall over FY30-34. Given that VIL has raised equity of Rs 44,700 crore since 2019, we believe raising another Rs 16,000 crore equity amidst improving operating cashflows and continued government support may not be difficult," Jefferies said.

Vodafone Idea has been working to raise debt to strengthen its financial position. CNBC-TV18 reported in May that the company was in talks with lenders and that SBI was likely to lead a consortium. Vodafone Idea reported a smaller-than-expected loss of Rs 3,750 crore in the first quarter ended June.

Indian authorities earlier this year provided Vodafone Idea with support by capping its past spectrum payouts, improving the company's prospects of attracting investors. The government had also converted about Rs 37,000 crore of outstanding dues into equity last year, increasing its stake to 48.99 per cent from 22.6 per cent.