Vodafone Idea, a telecom company facing significant debt, is set to receive a Rs 14,000 crore loan.
A consortium of lenders, led by SBI, has approved this loan. While this information has been shared by sources to Moneycontrol, it hasn’t been officially announced yet.
Vodafone Idea has been informally notified of the loan approval by banks like Punjab National Bank (PNB), Bank of Baroda, Union Bank of India, and others.
The funds will be disbursed to Vodafone Idea in phases. These funds are intended for repaying operational creditors, launching the 5G network, and participating in spectrum auctions.
Voda Idea is trying to raise this much fund
As per sources, following the successful FPO, Vodafone Idea is aggressively aiming to raise Rs 25,000 crore. The company had already raised Rs 18,000 crore through the FPO.
Vodafone Idea’s CEO, Akshay Mundhra, mentioned during an earnings call on May 17 that banks require the company to raise equity before providing a loan.
The plan includes raising Rs 25,000 crore and securing additional non-fund based facilities of up to Rs 10,000 crore.
Initially owing banks Rs 40,000 crore, Vodafone Idea has reduced this debt to Rs 4,000 crore.
After the FPO fundraising, the company sought a loan from banks, which has now been approved by the consortium.
Vodafone Idea shareholders approved a preferential equity investment of Rs 2075 crore from the Aditya Birla Group on May 8.
Additionally, in 2022, it raised preferential equity of Rs 494 crore from both the Vodafone Group and Aditya Birla Group.
Between March 2022 and May 2024, Vodafone Idea raised Rs 7000 crore from these promoter groups.
Will the health of Voda Idea improve only with funding?
Analysts at Bernstein, as reported by Moneycontrol, stated that Vodafone Idea intends to utilize the funding for expanding its 4G network and introducing 5G services to retain subscribers.
However, the brokerage firm emphasizes that merely raising funds won’t be sufficient for Vodafone Idea’s recovery; it will also need to implement measures such as tariff hikes to ensure its business sustainability.
JM Financial suggests that Vodafone Idea must raise its average revenue per user (ARPU) to Rs 320-360 by FY 2027, compared to Rs 146 in the March 2024 quarter.
This increase in ARPU is crucial for the company to meet its annual payments of Rs 35,000-43,000 crore to the government between FY 2027-31.
Additionally, Vodafone Idea may require government support, either through converting dues into equity or extending the moratorium period.
