Aditya Birla Group chairman Kumar Mangalam Birla is close to investing at least $150 million in Vodafone Idea Ltd in his personal capacity, two people aware of the matter said, as an immediate measure to keep the group’s cash-strapped telecom business afloat.
“An issue of fresh convertibles or equities is being considered. Birla is likely to invest from his personal assets as early as this month,” one of the two people cited above said on condition of anonymity.
“This capital infusion by Birla is crucial. Post Birla’s infusion in a personal capacity, Vodafone Group Plc (the company’s UK-based promoter), too, is planning to infuse a similar amount into Vodafone Idea either as a single investor or as part of a consortium of investors, who may together invest close to $1 billion into Vodafone Idea in March 2022,” this person added.
Birla’s capital infusion aims to enhance investor confidence and help the company meet immediate working capital needs, especially related to launches of new services to attract fresh customers, this person added.
Vodafone Group may invest in Vodafone Idea by using the proceeds from a planned sale of a stake in Indus Towers, jointly owned by Vodafone Idea’s rival Bharti Airtel and Vodafone Group through a 69.85% stake.
Spokespeople for Aditya Birla group and Vodafone Group did not respond to emails seeking comment.
On 13 October, Mint reported that Vodafone Idea promoters may invest $400 million to strengthen the company. The promoters’ decision to inject money after earlier ruling out such a possibility comes after the government announced a rescue package, including a four-year payment holiday on regulatory dues, to help prevent any further deterioration in the financial health of telecom operators.
Aditya Birla Group owns a 27% stake in Vodafone Idea through Grasim Industries, Hindalco Industries, Birla TMT holdings and other group companies. Vodafone Group owns 44% of the Indian unit.
On 4 September 2020, the board of Vodafone Idea approved a proposal to raise as much as ₹25,000 crore from outside investors. Over the past year, the telecom operator has held a series of talks with several strategic and financial investors to raise funds through a mix of equity and hybrid debt.
However, negotiations have stalled over the question of its survival, given annual regulatory dues of ₹25,000 crore over the next decade. However, in a major relief to the company, on 16 September, the government announced a four-year moratorium on regulatory dues, permitted 100% foreign direct investment in telecom through the automatic route, and redefined adjusted gross revenue (AGR).
The relief package has improved Vodafone Idea’s viability. Mint reported on 23 September that the company was reviewing the terms of its planned fundraising and may even drop a plan to monetize assets.
Still, the company has to repay ₹9,000 crore of loans to banks before the end of this fiscal, including ₹5,000 crore of non-convertible debentures.
Vodafone Idea’s gross liabilities, including regulatory dues, stood at around ₹1.9 trillion as of 31 March. The company owes ₹48,000 crore to eight banks, led by State Bank of India. Of this, borrowings amount to ₹23,000 crore, and the rest is in the form of bank guarantees.
Vodafone Idea’s annual dues repayment after the four-year payments holiday will increase from ₹24,800 crore currently to ₹43,000 crore, while dues to the government will likely grow from ₹1.6 trillion as of FY21 to ₹2.2 trillion, according to a 16 September Nomura note to clients.
According to a recent report by Motilal Oswal, while the government’s relief package has removed the immediate overhang of bankruptcy, it still needs capital infusion to address cumulative liabilities of around ₹12,000 crore till FY22-23.