Vodafone Idea shares: SBI-led lenders agree $3.5 billion debt financing, says report

Shares of Vodafone Idea Ltd are in focus on Friday after a report suggested that a group of lenders, led by State Bank of India (SBI), have agreed to offer about $3.5 billion of debt financing to the telecom operator. The move is seen helping Vodafone Idea rebuild its business, people familiar with the matter told Bloomberg.

Union Bank of India Ltd and the National Bank for Financing Infrastructure and Development are other local lenders in the consortium include, sources told Bloomberg, asking not to be identified because the information is not public.

The country’s third-biggest wireless operator in terms of users, plans to use some of the funds to improve its network and better compete with Bharti Airtel Ltd and Reliance Jio Infocomm Ltd., sources said.

Conditions regarding the funding include billionaire Kumar Mangalam Birla remaining as chairman throughout the tenure of the loan, which is nearly 10 years, and guarantees of repayment in case of default, sources said.  Business Today could not independently verify the report.

Representatives for Vodafone Idea and the banks did not immediately respond to requests for comment, according to the report.

As per the report, representatives for Vodafone Idea and the banks did not immediately respond to requests for comment.

To recall, Jefferies this week called Vodafone Idea a high beta turnaround play. It said the recent Rs 25,000 crore debt raise will be sufficient to tide over FY27-29, but noting that VIL will need Rs 16,000 crore fresh equity infusion in FY30 which will also trigger conversion of spectrum liabilities worth Rs 15,300 crore to 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 on raising debt to strengthen its financial position, with CNBC-TV18 reporting in May that the company, which is part-owned by the UK’s Vodafone Group Plc, 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 ($394 million) in the first quarter ended June.

Indian authorities earlier this year provided Vodafone Idea with a lifeline and improved its prospects of attracting investors by capping its past spectrum payouts. The government had last year also converted about Rs 37,000 crore of outstanding dues into equity, raising its stake to 48.99 per cent from 22.6 per cent.

The measures have helped Vodafone Idea’s shares, which have climbed almost 40 per cent this year, taking the company’s market capitalisation to Rs 1.6 lakh crore.