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Vodafone India’s $3.5 Billion Equity Issuance Not Enough: Fitch

Vodafone India’s $3.5 billion equity issuance may be insufficient going ahead, says Fitch Ratings top executive Nitin Soni.

“If you talk about Vodafone-Idea, the entity is a bit stretched right now. They are losing revenue market share rapidly to Jio and Airtel as well,” the director, Asian corporates, told ETNow, adding that it may come down eventually to 30 percent.

If that does happen, it would be down from 40 percent at the time of merger of the British telecom giant Vodafone and the Aditya Birla group’s Idea Cellular.

“In that light, I mean the $3.5 billion equity issuance which they have announced will be insufficient… because they have to increase their capex as well. They have to at least invest about $3.5 billion plus annually on the capex to avoid any network congestion and their EBITDA has fallen significantly,” said Soni.

Largest telco Vodafone Idea’s Rs 25,000-crore rights issue opened on Wednesday. The company, which came into being after the entry of Jio, plans to issue up to 20 billion fully paid-up equity shares of Rs 10 face value at a price of Rs 12.50 per share.

Soni pointed out that Vodafone India’s EBITDA is only $600 million plus which means their net debt to operating profit is quite high.

“So, we would see some more stake sales or equity injections on the Vodafone-Idea side, but if we talk about Bharti Airtel, they look comfortable at BBB minus rating,” he added.

The Securities and Exchange Board of India (Sebi) is believed to have cleared Bharti Airtel’s upcoming Rs 25,000 crore rights issue, according to an ET report.
Soni said the BBB minus rating with a stable outlook of Bharti Airtel reflects the equity injection of $3.5 billion coming in and a billion dollar perpetual bond which they will raise soon.

Fitch also believes that Bharti Airtel will raise another $3 billion through the African IPO by mid this year and another $2 billion from the sale of stake in Indus and Infratel merged entity.

“That will give a lot of relief to the balance sheet. Bharti’s FFO adjusted net leverage is quite high and that equity injection will reduce the leverage considerably and we do believe that after all these transactions, Bharti will be left with deferred spectrum liabilities in its Indian operations and will have about $2-2.5 billion at its African entity which will be quite comfortable,” he added.―India Finance News

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