In order to pay off its lingering legacy operating obligations, Vodafone Idea (Vi) is considering making fresh share offers to its vendors, such as Ericsson and Nokia, according to a credible source, quoting analysts.
Vi recently revealed intentions to fund up to Rs 2,458 crore by allocating preferred shares to Nokia and Ericsson in order to partially pay off their outstanding debts. Vi plans to give Rs 1,140 crore to Nokia and Rs 703.5 crore to Ericsson by September 2024. By December 2024, the remaining Rs 614.5 crore would be set aside for general corporate reasons.
"Part of Nokia and Ericsson's debt will be covered by the funds raised from the preferred issuance, but more dilution is possible."We wouldn't rule out further equity swaps and dilution to vendors in the future to clear operational dues, given that Vi's recent capital raise is designated for new capex," cited JP Morgan analysts.
Vodafone Idea Ltd.
Vi intends to use the freshly generated Rs 24,000 crore in equity capital only for new investments. Vi is saddled with almost Rs 20,000 crore in total obligations (including Rs 13,731 crore in trade payables). These funds will be used to introduce 5G networks and expand the reach of 4G. The majority of Vi's outstanding debts to suppliers, including as tower companies and providers of network hardware, are represented by trade payables.
Vi owed over Rs 3,000 crore to Nokia and over Rs 1,200 crore to Ericsson prior to the planned share sale. Following the issuance, it is anticipated that Nokia and Ericsson would own 1.5% and 0.9% of Vi, respectively. Indus, a tower vendor, on the other hand, has a difficult time getting Vi to pay Indus the about Rs 10,000 crore that is past due, plus interest. Because Bharti Airtel owns a significant portion of the tower company—nearly 48%—Vi is not allowed to issue shares to Indus because doing so would be against Indian telecom laws. "Unlike Nokia and Ericsson, Vi will be unable to issue shares to Indus under India's telecom laws due to Airtel's ownership in the latter," said JP Morgan.
