📷 Image Credits: Moneycontrol
Vodafone Idea, a joint venture between Vodafone Group Plc and Birla’s conglomerate, has received in-principle approval for a Rs 14,000-crore loan from a consortium of lenders, led by the State Bank of India (SBI). The consortium includes Punjab National Bank, Bank of Baroda, Union Bank, and other public and private sector banks. This approval comes as Vodafone Idea aims to revamp its unprofitable operations by launching 5G services and repaying operational creditors.
The funds will be disbursed in tranches once the transaction is closed. The telco has been aggressively pursuing its larger objective of raising a total of Rs 25,000 crore after a successful Rs 18,000-crore Follow-On Public Offering (FPO) earlier this year.
CEO Akshaya Moondra mentioned that banks required the telco to raise equity before granting loans, leading to an equity raise of Rs 7,000 crore between March 2022 and May 2024, including preferential infusions from Aditya Birla Group and Vodafone Group. The company has also reduced its bank debt significantly, from Rs 40,000 crore to around Rs 4,000 crore.
The funding secured will enable Vodafone Idea to expand its 4G network, improve coverage, and launch 5G services. However, analysts remain cautious, stating that the amount raised may not be sufficient for a significant impact on the industry dynamics. They suggest that VI may need significant tariff hikes and relief from government dues to become a sustainable telco.
Despite the successful FPO and investment plans in network expansion, analysts predict further market consolidation in the Indian telecom sector due to VI’s customer churn. The telco is expected to push for more investments in 5G rollout, but challenges remain in terms of debt reduction, revenue generation, and subscriber growth.
