In what marks a critical turn for the telecommunication giant Vodafone Idea (VI), the Board has approved a proposal to raise a sum of Rs 2,075 crore from its parent entity, the Aditya Birla Group. This funding is critical for the telecom operator, which has been grappling with financial hurdles, as the regulatory filing revealed on a Saturday.
The Board’s decision to issue as many as 1,395,427,034 equity shares each valued at Rs 10, at a price of Rs 14.87 per share, reflects an urgent strategy to infuse fresh capital. This includes a premium of Rs 4.87 per share as the company is slated to bring in Aditya Birla Group’s Oriana Investments Pte. Ltd on board, on a preferential basis, according to the statements in the filing.
In addition to this move, there is a planned increase in the authorized share capital, from the current standing of Rs 75,000 crore, subsequently stepping it up to Rs 1 lakh crore. Under this revision, the equity share capital would shoot up to Rs 95,000 crore, leaving the preference share capital unaffected at Rs 5,000 crore. This decision comes in the wake of an affirmative nod from the shareholders who, during an April 2 extraordinary general meeting (EGM), consented to issuing securities up to Rs 20,000 crore.
The larger context behind this decisive action by Vodafone Idea is its overarching plan to amass a war chest of Rs 45,000 crore through debt and equity. This hefty sum is set to enable the company to level the playing field against formidable rivals such as Reliance Jio and Bharti Airtel, as well as tackle the concerning dip in its subscriber base. The financial booster is anticipated to give VI the necessary leverage to consolidate its standing in the fiercely competitive Indian telecom sector.
Despite the government of India acquiring a 33% stake, Vodafone Idea’s voyage has been tumultuous, reflected in the staggering debt burden of Rs 2.1 lakh crore and the continuous reporting of quarterly losses triggered by dwindling subscriber counts. As per the latest figures from the Telecom Regulatory Authority of India (Trai), the company’s struggle to retain its subscriber base persists unabated.
January saw an exodus of 15.2 lakh wireless subscribers, shrinking Vodafone Idea’s mobile subscriber base to 22.15 crore. This unsettling trend starkly contrasts with the subscriber influx reported by Jio and Airtel. This pattern underlines the urgency for VIL to not just retain its current consumers but also to enhance its infrastructure and services, especially given the overdue implementation of 5G services and the insistence on improving 4G connectivity.
The Aditya Birla Group’s infusion of Rs 2,075 crore is a testament to the promoter’s commitment to steering Vodafone Idea through these choppy waters. With a scheduled extraordinary general meeting on May 8, the telco giant looks towards its shareholders to ratify this latest financial manoeuvre, which might very well decide its fate in the cutthroat Indian telecommunications market. An affirmative outcome would not only shore up investor confidence but would also pave the way for the consolidation and growth of operations that VIL urgently needs to stay afloat in the highly competitive arena and to begin the long-awaited expedition into next-generation technologies. This vote of confidence could mark the commencement of a long road to recovery, one in which VIL aspires to not only survive but to thrive.
