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MUMBAI : Vodafone Idea Ltd is in advanced talks with US private equity investor Apollo Global to raise as much as $1 billion by selling a mix of debt and equity, two people aware of the matter said.

The discussions are at an advanced stage, with the long-awaited announcement likely later this month, the people said requesting anonymity.

Debt-laden Vodafone Idea has been seeking to raise funds from external investors for more than a year but found it difficult to convince investors to write large cheques, given its mammoth government dues.

The nation’s third-largest telecom operator was on the brink of bankruptcy when the government offered a rescue package that gave the troubled company more time to pay dues and convert a part of it into equity, among other measures.

“Discussions have been going on for a while now and we had hit a roadblock over the conversion price from debt to equity," said one of the people cited above. “Typically, mezzanine funding involves a convertible structure where an investor is able to convert debt into equity to maximize gains when the investee company hits mutually agreed milestones," the person said.

However, Vodafone Idea’s fundraising has received a shot in the arm in the past weeks, with capital infusion by promoters and return of bank guarantees by the government, following last year’s government bailout package for the telecom sector.

A spokesperson for Apollo Global declined to comment. An email sent to a spokesperson for Vodafone Idea did not elicit a response.

Apollo Global Management is one of the largest asset managers globally and typically invests in credit, private equity, and real estate, among other asset classes and has close to $500 billion of assets under management.

In India, it had set up a special situations fund, Aion Capital, in partnership with the ICICI group. The fund has raised $825 million and has invested in 12 companies.

Analysts said that the deal with Apollo Global, if it happens, will pave the way for more investments in the company.

Vodafone Idea needs to raise as much as $3 billion to upgrade its network and buy spectrum in the upcoming 5G spectrum auctions.

On Friday, the department of telecommunications said it has returned bank guarantees to Bharti Airtel and Vodafone Idea, according to an affidavit filed by the department in the Supreme Court. The bank guarantees amount to nearly 23,000 crore.

The department has told the apex court that the bank guarantees have been returned since the telecom carriers opted for a moratorium on spectrum auction instalments and no instalment payments were due till post the moratorium period ends in 2025.

The move came as a major relief to debt-laden Vodafone Idea, which has been seeking return of the guarantees.

In addition, the conversion of interest on dues related to adjusted gross revenue and spectrum payments amounting to 16,000 crore—into equity by the Indian government will further strengthen its balance sheet.

Vodafone Idea’s total dues are nearly 1.9 trillion. The company recently got 4,500 crore from its promoters Vodafone Group Plc and Aditya Birla Group.

The telco also has board approval to raise as much as 10,000 crore from new investors through equity or debt, to help compete with larger rivals Reliance Jio and Bharti Airtel and for buying 5G airwaves in the upcoming spectrum auctions.

ABOUT THE AUTHOR
Swaraj Singh Dhanjal
" Based in Mumbai, Swaraj Singh Dhanjal is responsible for Mint’s corporate news coverage. For the past eight years he has been writing on the biggest deals in private equity, venture capital, IPO market and corporate mergers and acquisitions. An engineer and an MBA, he started his journalism career in 2014 with Mint. "
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