Vodafone Idea Ltd, owned by Vodafone PLC of UK and Aditya Birla group, on Friday decided to raise up to Rs 25,000 crore by way of share sale and debt.
The company’s Board of Directors, in a meeting in Mumbai, decided to raise the funds via equity of up to Rs. 15,000 crore andanother tranche of Rs. 15,000 crore, by way of public offering or private placement basis of nonconvertible debentures -- but with a ceiling of Rs 25,000 crore. Both proposals will be taken-up at the annual general meeting of shareholders scheduled on September 30.
The fund raising will help the company to get its finances back on track even as taking steps to cut operational costs which would lead to savings of around Rs 4,000 crore in the next 18 months.
The fund raising comes at a time when the company is fighting a pitched battle with Reliance Jio and Bharti Airtel to retain its market share. The company was hit hard by the Supreme Court order in October last year on adjusted gross revenues and was asked to pay Rs 58,254 crore of dues to the government. However, on Tuesday, the court gave 10 years to all telecom companies to pay their past dues. Vodafone has already paid Rs 7,854 crore as adjusted gross revenue (AGR) dues to the Department of Telecom.
Vodafone Idea’s share price of had reacted positively since the SC’s latest order but on Friday it closed 4.3% lower at Rs 12 a share – giving it a market valuation of Rs 34,511 crore.
In the first quarter of the ongoing fiscal (FY21), Vodafone Idea’s quarterly loss increased to Rs 25,460 crore as compared to Rs. 11,643.50 crore reported in the March quarter of FY20 which was up 100% on q-o-q basis and over 400% y-o-y basis. The increase in loss was on account of provisioning of AGR dues of Rs 19,923.20 crore (incl. interest and penalty) and continual operating loss due to lower average revenue per user (ARPU) levels.
The decline in ARPU in the June quarter to Rs 114 was due to lower recharge of tariff plan by customers due to the lockdown announced by the government to control the COVID-19 pandemic. Besides to retain its subscribers, the company provided validity extension and free recharge talk time to nearly 100 million customers.
Due to the increase in loss in the June quarter, the company’s net worth eroded from Rs 5,980 crore as on March 31, 2020. The independent auditor’s report on quarterly- and year-to date-unaudited consolidated financial results also warns about uncertainty on going concern of the company. Its gross debt (excluding lease liabilities) as of June 30, 2020 was Rs 1,18,940 crore, including deferred spectrum payment obligations due to the Government.
Its subscribers base also declined to 279.8 million in the June quarter from 291.1 million in the March quarter of FY20.