By Suresh kumar
Mumbai, April 4, 2024 — Vodafone Idea Ltd., the beleaguered Indian wireless carrier, has taken a significant step toward financial recovery by appointing the investment banking units of Axis Bank Ltd. and Jefferies Financial Group Inc. for its $2.4 billion share sale. The move comes as the company’s founders—Vodafone Group Plc and the Aditya Birla Group—strive to turn around the unprofitable joint venture.
Seeking a Turnaround
Vodafone Idea has been grappling with financial challenges for years. Despite its efforts, it hasn’t reported an annual profit since 2016. The company faced stiff competition from stronger rivals like Reliance Jio Infocomm Ltd. and Bharti Airtel Ltd. In a bold move in 2022, Vodafone Idea converted its unpaid dues to the Indian government into a 36% equity stake, a decision that surprised investors and made the government the company’s largest shareholder overnight.
The Fundraising Effort
The recent appointment of Axis Bank and Jefferies marks a significant milestone for Vodafone Idea. The company aims to raise as much as 200 billion rupees ($2.4 billion) through shares or equity-linked instruments. While a price of approximately 12 rupees per share is being considered, this figure may change, potentially representing an 11% discount to Wednesday’s closing price.
Additionally, Vodafone Idea plans to consider a preferential issue of up to 20.75 billion rupees to founder-linked firms on April 6. These funds are expected to come from entities associated with billionaire Kumar Mangalam Birla, who chairs the Aditya Birla Group.
A Long-Awaited Boost
The fundraising effort by Vodafone Idea is a culmination of years of struggle. The company’s survival has been at stake, given its massive debt of 2.1 lakh crore rupees and ongoing quarterly losses. However, the federal government’s commitment to prevent a telecom duopoly in India signaled that Vodafone Idea would not be allowed to collapse.
The 200-billion-rupee fundraising, approved by the company board in February, represents a positive step toward improving the company’s 4G and 5G services. While challenges remain, this infusion of capital provides hope for a brighter future for Vodafone Idea.
Disclaimer: This article is based on publicly available information and should not be considered financial advice.
Summary
Vodafone Idea Ltd., the Indian wireless carrier, has appointed Axis Bank Ltd. and Jefferies Financial Group Inc. for a $2.4 billion share sale. The company aims to raise up to 200 billion rupees ($2.4 billion) through shares or equity-linked instruments. This move comes after years of financial struggle, with Vodafone Idea facing competition from stronger rivals. The fundraising effort represents hope for the company’s future, despite its massive debt and ongoing losses.