Vodafone-Idea plans on QIP; puts off debt funding

Vodafone Idea Ltd (VIL) may opt for a pure equity round instead of trying to raise as much as $2 billion in hybrid debt, two people directly aware of the company’s plans said.

The shift in strategy was announced soon after the Supreme Court in September extended a deadline to repay outstanding regulatory dues in a staggered manner. The telecom company, shortly after this, announced plans to raise around 25,000 crore in a combination of debt and equity. Earlier, the company had planned to raise around 15,000 crore via hybrid instruments followed by an equity raise, reported Mint.

“VIL is considering a change in strategy now because investor sentiment has significantly improved along with the company’s prospects. The company now plans to raise capital via a fresh equity issuance through a qualified institutional placement (QIP). The fundraising is likely to be done in two tranches, and the plan is to bring in a large marquee investor so that the stock gets a fillip. Only after the stock price improves will the second tranche be launched so that the sale does not result in too much dilution of promoters’ stake,” said the first person.

“In the proposed QIP, the existing promoters are also likely to participate to ensure their holding doesn’t get diluted much and also the much-required capital infusion is done,” said the second person.

The UK’s Vodafone Group Plc holds around 43% in VIL, while the Aditya Birla group holds 29%.

A group of companies led by US-based Oaktree Capital, including a few other private equity firms such as Varde Partners, has proposed investing up to $2.5 billion into cash-strapped VIL through hybrid debt papers. Amazon.com Inc and Verizon Communications, the largest wireless carrier in the U.S., were also in talks to buy a significant stake in struggling VIL for more than $4 billion.

VIL has so far paid 7,854 crore in adjusted gross revenue, or AGR dues, but still owes more than 50,000 crore to the department of telecommunications, which it needs to pay in the next 10 years.