Vi shares under spotlight as $2B fundraise approaches

Shares of Vodafone Idea will be in focus ahead of its extraordinary general meeting on Saturday, March 26. The company, in its stock exchange filing, has announced that it is planning to raise around Rs 14,500 crore equity from promoters – UK’s Vodafone Group Plc and India’s Aditya Birla Group (ABG) — and external investors as the cash-strapped operator tries to revive its operations and take on financially stronger rivals, Reliance Jio and Bharti Airtel.

The stock exchange filings show that subject to shareholder approval, promoter entities will infuse around Rs 4,500 crore at an issue price of Rs 13.30 per equity share. The balance of Rs 10,000 crore will be raised from institutional investors through private placement, qualified institutions placement, or any other permissible mode in one or more tranches.

The stock declined over 8% in the last one month, trading flat at Rs 10 on Tuesday.

While recommending institutional investors to vote in favour of the resolution pertaining to approval of preferential allotment to promoters, proxy advisory firm IiAS said the issue would lead to a dilution of 10.5%, and the equity raise gives the company funds required to meet its payment obligations as well as repay its dues and meet its working capital requirements.

“The company has stated that the issue proceeds will be used for payment towards the passive infrastructure services from Indus Towers and general corporate purposes,” the IiAS note said.

According to bankers, some private equity investors have shown interest and made offers for stake for the fundraising plan of Vodafone Idea. “There are a few private equity payers are in the fray. Investors’ confidence has been bolstered due to infusion of Rs 4,500 crore by the promoters and the recent stake sale of Indus Towers to Airtel,” said an investment banker who helps companies raise funds from institutional funds investors on the floor of the stock exchange.

In February, Vodafone sold around 5% in Indus Towers to Airtel for Rs 226.84 apiece and is likely to sell the remaining stake soon. This stake sale generated net proceeds of approximately Rs 1420 crores.
The government had announced bold telecom reforms in September 2021 to address the financial stress in the sector. Sources see the reform package and funds infusion as a lifeline to make VIL competitive.

Promoter infusion of Rs 4,500 crores will be led by Euro Pacific Securities and Prime Metals (Vodafone Group entities and promoters of the Company) and Oriana Investments (Aditya Birla Group entity forming part of the promoter group) on a preferential basis.

According to reports, Vodafone intends to contribute a certain portion of the Vodafone Idea’s net proceeds. The development comes after a challenging period for the company, facing intense competition and losing millions of wireless subscribers to Reliance Jio and Bharti Airtel. TechiLive