Vodafone Idea may tap FCCB route to raise $750 mn-$1 bn, Telecom News, ET Telecom

Vodafone Idea is moving towards the possibility of overseas convertible bonds to raise between $ 750 million (approximately Rs 5,550 crore) and $ 1 billion (approximately Rs 7,400 crore) at the earliest to pay its sales quotas, meet loan repayment obligations and also fund capex plans, said people with knowledge of the matter.

“The company is considering leveraging the overseas bond markets in early February as it needs immediate funds to invest in its networks, make payments to suppliers and halt subscriber losses,” one person told ET.

‘Government portfolio is seen as a matter of comfort for bond investors’

An email inquiry sent to the company did not elicit a response until it went into print Thursday.

The move comes after the company on Tuesday decided to convert its deferred spectrum interest and adjusted gross income (AGR) to government equity, giving the government a possible 35.8% stake in the company. The public portfolio is seen as a matter of consolation for bond investors, experts say.

With a gross debt of Rs 1.9 lakh crore on its books, including deferred spectrum and AGR payment obligations to the government and debt from banks and financial institutions, the company’s cash and cash equivalents had fallen to Rs 250 crore at the end of September from Rs 920 crore kl. end of June.

“When the government debt is converted to equity, there will be a significant improvement in Vi’s credit conditions,” said Hemant Mishr, founder and CIO of SCUBECapital, a Singapore-based global fund, enabling the otherwise highly leveraged company to tap bond markets.

Mishr added that We in the Spirit continue to be a privately run private company. “Given an improved balance sheet, there will be potential appetite from international investors in the foreign currency convertible bond (FCCB) and foreign exchange convertible markets, provided the valuation remains reasonable.”

While giving the telecommunications companies time until January 12 to accept or reject the offer, DoT had said that shares in telecommunications companies that opt ​​for conversion would be held through the Unit Trust of India or by any kind of trustee or other appropriate arrangement which had to be prepared by the government.

We have for several months been in negotiations with a number of PE actors such as US-based Apollo Global on equity and debt financing, but we have not yet managed to reach an agreement. Its top management has previously said that the telecommunications company will conclude a financing agreement before the end of March, a position that its CEO Ravinder Takkar reiterated on Wednesday.

Equity financing also depends on how much capital the initiators bring to the table. ET has previously reported that Kumar Mangalam Birla, chairman of the Aditya Birla Group and a Vodafone Idea employee, is likely to inject around $ 200 million of his personal funds into the loss-making telecommunications company, with the other parent – UK’s Vodafone Group – also likely to bring in a similar amount. Due to the state’s share, Vodafone Group’s shareholding is likely to fall from 44.39% to 28.5% and ABG’s share from 27.66% to 17.8% in Vi.

“The company is trying to tie up capital before the end of March, but until that happens, it has to keep generating funds as it has to pay its suppliers and cover other network costs,” a senior industry executive told ET.

Vi’s management had said in an investor call in December that the company planned to increase investment expenses fourfold to $ 2 billion in the next fiscal year starting April.

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