Vodafone unlikely to make fresh equity infusion in cash-strapped Vodafone Idea: Report

As cash-strapped Vodafone Idea (VIL) gasps for breath, Vodafone Plc is unlikely to make any fresh equity infusion in the Indian telecom business.

“Just to confirm our position, there will be no new equity infusion from Vodafone Group,” a spokesperson at the UK-headquartered telco told Business Standard.

The statement comes after the Cabinet approved a telecom package last week that triggered speculation that the two key shareholders in VIL may invest in the company once again. While there has been no official confirmation from the company on cash infusion, a report by the Mint quoting sources suggested that Vodafone Plc and Aditya Birla are considering equity infusion into Vodafone Idea.

DH independently could not verify the report.

Vodafone Plc holds 44.39 per cent in Vodafone Idea, while Aditya Birla Group has a 27 per cent stake. Institutional holders have around 5.59 per cent stake.

While Vodafone Plc had written off the book value of its shareholding in Vodafone Idea in November 2019, Aditya Birla Group chairman Kumar Mangalam Birla had, in a communication with the government, a few weeks ago, offered to give up his stake to the government to revive the company.

Also Read — Kumar Birla ready to give up Vodafone-Idea stake to govt entity

In a letter to Cabinet Secretary Rajiv Gauba on June 7, Birla said that with a "sense of duty" towards 27 crore Indians connected with Vodafone Idea, Birla is willing to hand over his stake to the Public Sector Unit (PSU), a government entity or any domestic financial entity, or any other entity that the government may consider worthy of keeping the company as a going concern.

According to the report, the telecom package is expected to reduce its cash flow for the next four years of the moratorium by around Rs 1.1 lakh crore. However, it has to pay both the interest as well as the adjusted gross revenue (AGR) and spectrum dues after the moratorium. The total gross debt (excluding lease liabilities and including interest accrued but not due) as of June 30, 2021, of VIL stood at Rs 1,91,590 crore, comprising deferred spectrum payment obligations of Rs 1,06,010 crore and AGR liability of Rs 62,180 crore that the government is due.

Under the telecom package, the government has agreed to a conversion of the dues to equity, in case the company fails to pay up. The government can hold anything between 30 per cent (if only the interest is converted ) and 70 per cent stake (if interest with the principal is converted) in the company at a price of Rs 10 per share. But the package could help the company stay afloat if it goes for a tariff hike and also gets a strategic investor to pump in at least Rs 25,000 crore.

Analysts, as per the report, estimate that the company would require a cash infusion of over $10 billion (or Rs 73,600) in the next four years if it wants to stay in the game.