Vodafone Idea, the country’s largest telco by subscribers, on Wednesday said that it will meet its funding requirements as well as other possible capital infusion plans through its Rs 25,000-crore rights issue, which closes today.
“We are raising capital via this rights issue, further monetisation of our stake in Indus Towers will add to the liquidity. We believe that these, along with the cash flows from our operations, will be sufficient to meet our funding for the foreseeable future. Additionally, we also have the option to monetise our fibre assets,” Akshaya Moondra, Chief Financial Officer, Vodafone Idea Ltd told .
The company has 1.58 lakh kms of fibre network. It expects Rs 5,500 crore through its 11.15 per cent Indus Tower stake sale in 3-4 months, though the exact realisation will depend on Bharti Infratel’s stock price.
Under a contract signed with Bharti Infratel in April 2018, the company has an option to sell its stake in Indus Tower for cash ahead of Infratel’s merger with the Bharti group firm.
Moondra earlier told that he expected the rights issue to be fully subscribed. Early morning shares of Vodafone Idea was up marginally at Rs 17.10.
While the company believes that its Rs 25,000-crore fund raising will create a strong enough war chest and capitalisation to manage the high intensity competition in the low-priced Indian telecom market, analysts have a different take.
“Vodafone idea is very stretched because their Ebitda has fallen to about $650 million(around 4,455.8 crore), their debt is also quite high and their leverage as measured by debt-to-Ebitda too is high,” said Nitin Soni, Director for corporate ratings at Fitch Ratings.
Soni said the amount was insufficient and it might have to raise more money in future because the company’s capex plan was about $3.5-4 billion. “So all in all they would probably need more equity, or stake or sale of other assets,” he added.
Airtel and Vodafone Idea, the two incumbents, face huge disruption due to the entry of Reliance Jio, which has already become the third-largest player in the telecom sector with 300 million subscribers in just over two years through cheaper tariff and better service 4G services.
Vodafone Idea, the operator with the highest number of subscribers, lost the most users — 57.87 lakh — in February, pulling its subscriber base down to around 40.93 crore. Bharti Airtel’s subscriber base too eroded by 49,896 users, and by the end of February it had 34.03 crore subscribers, showed the TRAI data.