Vodafone Idea’s (Vi’s) search for a lifeline has turned longer and tougher even as it continues to lose customers and delay vendor payments.
Vi’s much-needed Rs 1,600-crore fundraising plan got stuck due to the government’s silence on picking up a proposed 33 per cent equity in the financially stressed telco.
The development spells further trouble for the company, which has an overall debt pile of Rs 2.2 trillion, including hefty dues to the government.
This comes in the midst of a group-level crisis at Vodafone, the Newbury (Berkshire)-headquartered partner of the Aditya Birla group in Vi.
On Monday, Vodafone had announced the resignation of group CEO Nick Read after he failed to halt the continuous slide in the share price and get the big global merger deals going.
Back home on Tuesday, Vi informed the stock exchange that the shareholder resolution for issue of optionally convertible debentures to American Tower Corporation (ATC) had lapsed in the absence of an approval from the government for conversion of interest on adjusted gross revenue and spectrum dues into equity.
The issuance of equity stake to the government is a condition for fund infusion by ATC.
Significantly, in a filing with the US Securities and Exchange Commission, ATC had earlier this week expressed uncertainty over receiving timely payments from Vi.
Government sources had earlier indicated that the conversion of interest into equity would depend on Vodafone Idea promoters infusing funds.
The promoters, on their part, have not infused fresh funds. When contacted, officials at the Department of Telecommunications (DoT) on Tuesday said that no decision on the matter had been taken so far and that the issue was still being investigated by the finance ministry.
"This is a dynamic matter and involves many moving parts.
"The finance ministry continues to look into the issue," a senior DoT official said.
Vi maintained that it had no intimation from the government on debt conversion.
Senior bank executives said while the delay (in capital raising) was definitely a matter of concern, there was no change in lenders’ stance.
Capital infusion should happen before new funding from lenders could be considered, they said.
"The telecom operator is making payments till now and is not being considered as an account for additional provisioning,’’ one of the bankers said.
The company has reduced its bank debt to Rs 15,000 crore in Q2 FY 2023 from Rs 23,000 crore a year ago.
In its exchange notification, Vi said: “As the company has not received any communication from the government of India on such conversion (AGR interest dues into equity), the issuance of optionally convertible debentures to ATC has not been completed within the validity period of shareholders’ resolution (15 days from the passing of the resolution).
"Accordingly, the shareholders’ resolution has lapsed.”
“The company is in discussion with ATC for extension of the agreement and a fresh shareholders’ approval will be sought as required,” Vi added.
On October 21, the Vi board had approved the issue of 16,000 OCDs having a face value of Rs 10 lakh each to raise Rs 1,600 crore.
These were to be converted into equity shares of Rs 10 each for allotment to ATC Telecom Infrastructure Private Limited on a preferential basis.
The company’s shareholders approved the plan on November 21.
Vi had said the funds raised via debentures would be used to pay pending dues of ATC under the master lease agreement and any remaining amount could be used for general corporate purposes.
For the past several months Vi has struggled to raise funds leading to delayed vendor payments and subscriber loss.
It has been unable to sign contracts with gear manufacturers for 5G network equipment while competition is aggressively rolling out their services.
In a post-result conference call last month, Vi CEO Akshaya Moondra told analysts: "We are trying to close the funding quickly so that some of the backlog of vendor payments that we have can be addressed.”
With inputs from Abhijit Lele in Mumbai