Vodafone Idea in talks with SBI to borrow up to 16,000 crores | Rare Techy

Freelancer Vodafone Idea (Vi) has approached State Bank of India (SBI) for a loan of ₹15,000-16,000 crore to meet its immediate 4G needs, contracts to supply equipment for its pending 5G rollout and clearing some of the seller’s large fees, three people familiar with the matter said.

Debt raising – talks have been ongoing for more than a month – though, as the country’s biggest lender seeks clarity on the government’s potential stake in Vi, as well as plans to expand the telco’s business.

“The team is in talks with Vi, but it is at a new stage… some clarity has been sought… on when the government will transfer the telco’s interest liability to equity and its business plans,” a senior banker directly involved in the discussions said. ET said. Another person privy to the talks said the Vi proposal would be placed before SBI’s apex credit committee to finalize the terms only after clarity on plans to expand the loss-making telco.

Hanging fire

At the time of going to press, ET’s queries to SBI, Vi, Vodafone Group Plc and the Aditya Birla Group went unanswered. Shares of Vi ended 2.23% higher at Rs 8.25 on the BSE on Wednesday.

In the second quarter, the net debt was around 2.2 trillion. In early September, the telco gave SBI a Rs 2,700-crore short-term loan to boost creditor confidence. The loss-making operator ended the September quarter with a cash balance of Rs 190 crore.

In May, Vodafone Idea reiterated its September 2020 announcement that it plans to raise Rs 20,000 crore through a mix of debt and equity. This was in addition to the promoter’s equity infusion of under Rs 5,000 crore received before May.

However, continued delay by the government to transfer Vi’s Rs 16,130 crore interest on deferred adjusted gross income (AGR) to the jurisdiction has delayed equity transfer by potential third-party investors. These investors also want clarity before investing in government shares, leaving the loss-making telco to raise more debt to meet its immediate needs.

Analysts estimate the government’s stake after the transfer to be around 33%, making it the largest shareholder in the telecom.

Vi is now in a Catch-22 situation, with the government also wanting the telco to present a clear fundraising plan, including an infusion of more promoters, before it goes through with the transition.

A third executive, privy to the loan deals, said SBI also wants to know whether Vi’s developers — UK’s Vodafone Plc and India’s Aditya Birla Group — plan to inject more equity into the struggling telco. The bank has also sought an update on any global strategic investors participating in the operator’s expected external fundraising.

Vi had received a shade over Rs 4,900 crore from developers earlier this year. But much of that money was used to clear some of the debts of the Indus tower company.

Optimistic About Vi

However, lenders are open to supporting Vi as, over the past year, telco loans to banks and financial institutions have declined by over a third – from Rs 23,400 crore in April-June FY22 to Rs 15,080 crore in July- September FY23.