In a recent meeting with Aditya Birla Group Chairman Kumar Mangalam Birla, top officials of the Department of Telecommunications (DoT) were told that Vodafone Idea Ltd (VIL) was in advanced negotiations with three to four private equity funds in its effort to raise about Rs 20,000 crore.
Confirming the development, a top DoT official said, “We had a meeting with Birla who is one of the promoters of VIL and is spearheading the fundraise. We were told that negotiations are on with 3-4 private equity funds to raise money. While no timeline was discussed, we are sure that VIL will be able to turn around and we expect it to happen soon.”
When asked whether Birla had asked for any more concessions on the repayment of VIL’s dues to the government, such as converting a part of the dues into equity, the official said: “No such proposal has been discussed so far.”
A large part of the VIL’s dues to the government comes up for payment in FY26. The assurance from one of the key promoters of VIL is significant as there have been concerns over the adverse impact the company could have due to the inordinate delay in raising funds. What’s more, without funds, it is not going to be able to roll out 5G services or even expand its 4G services. VIL has covered 90 per cent of the country, while its competitors have pan-India coverage.
A VIL spokesperson declined to comment on the issue. A query to the Aditya Birla Group did not elicit any response either.
There have been reports that the PE funds with which VIL has had discussions include New York-based KKR and Singapore-based Temasek Holdings, although both have declined to comment on the matter.
One stumbling block for investors earlier was having to wait till the government converted a part of its dues into 33 per cent equity in the company, making it the single largest shareholder.
The conversion, which was delayed for 16 months, finally happened in February 2023, when the government converted Rs 16,133 crore worth of interest payments into equity, thereby clearing a key impediment to negotiations with potential investors.
The conversion to equity by the government has helped VIL to marginally reduce its debt which is still at Rs 2.1 trillion. But the good thing is that the bulk of its debt due to the government (Rs 1.96 trillion) is revenue share dues and deferred spectrum liabilities. VIL has been able to service its smaller bank debt from its EBITDA and pay its vendors from the cash generated from operations.
However, after the two-year moratorium, the company has to pay a large amount to the government in FY26. Its debt repayment, which is pegged at Rs 84 billion by Kotak Institutional Equities in FY24, is projected to swell to Rs 326 billion in FY 26. Of course, VIL has the option of requesting the government to convert more of its dues to equity or give them further relief on payments, which is possible under the draft Telecom bill.
Also, while the company has not lost too many of its subscribers (8 per cent of them have 5G phones) to its competitors who are offering 5G services, its overall subscriber revenue share has fallen from 18 per cent in Q4 FY 22 to 16.4 per cent in Q4 FY 23. And while its average revenue per subscriber (ARPU) has remained stagnant, its overall subscriber base is falling. Business Standard