Vodafone Idea to see ₹14,000 crore equity infusion as part of revival plan: Report

Vodafone Idea Ltd (Vi) is reportedly proposing a significant equity infusion of ₹14,000 crore as part of its business revival plan. The plan includes contributions from the company's existing promoters, Aditya Birla Group (ABG) and Vodafone Group Plc, a report by Economic Times cited.

According to sources familiar with the ongoing discussions, ABG and Vodafone Group will invest ₹2,000 crore as fresh equity, with the promoters already having invested ₹5,000 crore since the government's telecom revival package in September 2021.

As outlined in the plan submitted to the government, the promoters will collaborate with the company to raise an additional ₹7,000 crore from external investors, either through direct equity or convertible structures. 

Vodafone Idea to be worst affected as tariff hikes expected after June 2024

The delay in increasing headline tariffs due to upcoming state and general elections next year is expected to negatively impact all three major carriers in India - Airtel, Jio, and Vodafone Idea. Among them, Vodafone Idea is predicted to suffer the most. Analysts point out that without a tariff hike or a fundraising effort, the fiscal year 2024 will be challenging for the third-ranked telco, Mint had reported earlier. 

 The significant outstanding debt of Rs1.96 trillion owed by Vodafone Idea to the government further complicates matters, potentially leading to substantial equity dilution and making it unappealing to potential investors.

“The rising competitive intensity to attract premium subscribers and several key state and general elections over the next 12 months would likely delay tariff hikes to June 2024 (after the general elections). Though a delay in the tariff raise is negative for all three telcos, we believe Vi would be the worst impacted.,” analysts at Kotak Institutional Equities Research said in a note.

Analysts estimated that the Aditya Birla Group promoted telecom services provider will face a cash shortfall of Rs5400 crore in FY24 and survival would be a challenge without a large and expedited fund raise. In addition to this, Vodafone Idea owes nearly Rs13500 crore in vendor payments.