Vodafone Idea denies Rs 10,000 crore promoter capital infusion news

On September 28, 2021, there was a media report that Promoters may invest Rs 10,000 crore in Vodafone Idea (VIL). The report quoted the source of information to be the government (Department of Telecommunication).

However, on September 29, 2021, the Company denied that there is any such proposal under consideration by the board.

Key points to note –

  • On the back of recently announced telecom relief measures, it’s not hard to assume some truth to the news.
  • Company if discussing anything on these lines will never inform formally before all the details are sorted out.
  • VIL needs funding to survive and expand and there is no way it can do so without fresh fund raise. Whether existing promoters would continue – difficult to predict at this time. This is especially because as per the reform measures, the liabilities have only been deferred (that too with interest) and not extinguished – and the liabilities are huge.
  • Company had total gross debt of ₹1.91 lakh crore, excluding lease liabilities and including interest accrued but not due, as on June 30, 2021. The debt comprises Rs 1.06 lakh crore of deferred spectrum payment obligation, Rs 0.62 lakh crore of AGR liability and Rs 0.23 lakh crore debt from banks and financial institutions.
  • These are huge numbers and Rs 10,000 crore of fund raise will not move the needle.
  • Company needs regular fund infuses from long term large investors.

The only reason why promoters/ investors would provide some serious support to the Company is if they believe in the future prospects of the Company and that largely depends on the underlying competitive pressures (especially from Jio) and the ability to increase tariffs.

Sunil Bharti Mittal (Airtel) is trying to bring in that discipline in the industry. However, everything depends on what Jio wants to do.

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