How 80% jump in Vodafone Idea’s share price may delay its fundraising plan

In June Vi proposed to infuse a total equity of Rs 14,000 crore in the near term as part of its business revival plan. According to the plan submitted to the government ABG and Vodafone Group offered to invest Rs 7,000 crore as fresh equity in the company

An unfettered rally in the share price of Vodafone Idea (Vi) in the last six months has stalled the much-anticipated fund infusion in the cash-strapped telecom company, sources aware of the ongoing negotiations told Moneycontrol, requesting anonymity. While the company in recent filings set December as the deadline for the fund infusion, the stock price run-up has temporarily derailed discussions, the sources said.

“The stock has risen by almost 80 percent in six months which has rendered fundraise via a convertible structure difficult, if not impossible,” said the first person in the know. “Ironically, the current rally in the company shares is driven by expectations of fundraise,” the first person cited added.

Convertible structures typically encompass elements of both debt and equity and often come with fixed payouts to investors, while also allowing converting debt into equity at a pre-decided price, for a potential upside.

Typically, private credit funds and special situation funds participate in these kinds of transactions, the repayment time period of which ranges from two to three years on average. Emails queries sent to Vodafone Idea, Aditya Birla Group and Vodafone Group Plc remained unanswered.

“With the current rally in place, some investors feel that there may not be much upside post-conversion in the timeframe they are looking at, “ said the second person. “What has also dampened things further is the refusal of promoters — Aditya Birla Group (ABG) and UK’s Vodafone Group — to provide any additional collateral, such as corporate guarantee to lenders,” the second person added.

Challenging times

While the company remains engaged with investors, sources said the progress of the talks largely depends on the company’s business performance especially when it comes to customer attrition, which resulted in a significant loss of market share for the company. Also, a potential industry-wide tariff revision too could tilt the scale in its favor they said.

Vi’s subscriber base declined for nine consecutive months this calendar year as it lost 7.5 lakh mobile customers during September, bringing down its user tally to 22.75 crore. The Telecom Regulatory Authority of India data showed that Reliance Jio added 34.7 lakh mobile subscribers in September while Airtels’ subscriber tally rose by 13.2 lakh. Vi lost 7.5 lakh mobile subscribers during the same period.

In June Vi proposed to infuse a total equity of Rs 14,000 crore in the near term as part of its business revival plan. According to the plan submitted to the government ABG and Vodafone Group offered to invest Rs 7,000 crore as fresh equity in the company while proposing to raise another Rs 7,000 crore as direct equity or through convertible structures from external investors.

Vi ‘s net loss for the quarter ended September widened to Rs 8737.9 crore against Rs 7595.5 crore in the same quarter last year. On a brighter side however its revenue from operations stood at Rs 10,716.3 crore, rising 0.95 percent from 10,614.6 crore in the corresponding quarter, driven by better subscriber mix and 4G subscriber additions