BackKumar Mangalam Birla likely to infuse own capital into Vodafone Idea: Report
Infusion by billionaire Kumar Mangalam Birla could be less than ₹1,000 crore
PremiumAditya Birla Group chairman and billionaire Kumar Mangalam Birla is expected to infuse a token sum of less than ₹1,000 crore into Vodafone Idea, reciprocating to the Centre's reform package that largely intended to revive the ailing telecom sector.
"Much of the funds will have to come in from external sources. KM Birla will put in some money, but not a significant sum while Vodafone is unlikely to pump in more money (from the UK group). Monetising the assets in Indus is really the plan," a top official close to the Vodafone Group told Economic Times.
"Clearly, investors want both the promoters to put their money where their mouth is. It is only after that that external fund-raising will happen," the official added.
Over the past year, the firm tried unsuccessfully to raise funds from outside investors because of its deteriorating financial condition and uncertainty about whether the Centre will announce measures to help the cash-strapped telco. Vodafone Idea had announced a plan to raise at least ₹25,000 crore in September 2020.
Vodafone Group owns 45% of Vodafone Idea, and the Indian promoter group, which includes Kumar Mangalam Birla and Aditya Birla Group firms, holds a 26% stake.
Vodafone Idea’s current market valuation is ₹31,000 crore. The telco 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 firm owes a total of ₹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.
Bankers estimate the annual debt repayment of Vodafone Idea to be around ₹6,000 crore over the next two years. Moreover, after the four-year holiday ends, payments to lenders and the government are also set to increase sharply.
Vodafone Idea’s annual dues repayment post the four-year payments moratorium will increase from ₹24,800 crore currently to ₹43,000 crore, while dues to the Centre will likely grow from ₹1.6 trillion as of FY21 to ₹2.2 trillion after the moratorium ends, according to a 16 September Nomura note to clients.
Birla, who has stepped down as chairman of Vodafone Idea Ltd, had previously sought the Central Government's support and had also offered to give up his stake in the telecom operator.
Vodafone Idea has continuously made annual losses after March 2016 since the entry of Mukesh Ambani's Reliance Jio that year. Jio debuted with ultra-low prices, forcing rivals to quit, merge or go bankrupt.
Of all the major companies operating in the country's telecom sector, Vodafone Idea Limited (VIL) is encountering the biggest financial crisis and needs urgent relief.
If the government's telecom relief package is in line with expectations, it could provide $1 billion in annual relief to VIL.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
