Vodafone Idea expects equity fund raise by March 2022. Key would be who comes on board.

Target Date - March 31, 2022

As per newspaper reports, Vodafone Idea (VIL) mentioned the following in an internal investors’ call –

  • Equity funding, including from promoters is set to be tied up by March 2022.
  • Company is targeting an annual capex of about $2 bn, which is 4x of the current annual capex of $500 mn.

Both these communications are very important, as –

  1. This is the 1st time when company has given any indication of further fund infusion by the promoters – Vodafone and Birla Group.
  2. Increase in capex is important to ensure better customer experience, that otherwise have been facing significant quality issues for last many years and therefore have been moving towards Jio and Airtel.

I have always maintained – VIL need a significant support from some investors with deep pockets as it has large funding requirements. Liabilities run into couple of lakh crores and they would come back to haunt the company later as they have only been deferred. Besides, the Company would need money for 5G to remain competitive.

Promoters alone would not be able to do much to VIL as neither do they have very deep pockets nor they may want to put in large sums given the inherent risks.

It’s easier for VIL to create excitements in the short term given the current environment and government’s intention to keep it a 3 player industry.

Long term however doesn’t provide much confidence to me as an investor and it is independent of whether VIL survives or not.

I personally believe it will survive but needs significant restructuring, liability settlements and also the new owners.

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