Vodafone Idea Seeks to Raise up to $3 billion from Apollo Global

Vodafone Idea has started talks with US PE group Apollo Global Management to secure up to $3 billion in funding over the next three months, sources report. The telco is targeting a mix of debt and equity as it seeks to meet upcoming payment obligations.

Vodafone Idea Prepared to Offer 'Sizeable' Stock

One of the industry executives said that talks with Apollo are focused on business valuations, funding terms and structure of the proposed deal. But unlike failed fundraising efforts in the past, "Vi is keen to secure its funding entirely through Apollo Global this time," said one of the executives aware of the matter. The executive further added, "Vi is even open to offering a sizeable stake once there is agreement on valuations and terms". There is a notable difference in the way Vodafone Idea has approached this fundraiser. Earlier, it was focused on capital infusion through convertible debt instruments. But now, it will just offer a share, as sources report.

Vodafone Group Plc and the Aditya Birla Group own 44.39% and 27.66%, respectively, in Vodafone Idea at the moment. Both of these companies are the telco's co-promoters. Both of them have so far refused to infuse any fresh equity. For now, it looks likely their stance won't change. However, given its weak financial position, Apollo can push them to make some capital infusion to boost its comfort level before agreeing to the deal, said another person aware of the talks.

Apollo Global could impose stringent covenants, including corporate guarantees from Vi’s co-promoters. This will secure Apollo against potential payment defaults. Industry insiders, though, expect both the Birlas and Vodafone UK to oppose such terms on offering corporate guarantees.

A top banker familiar with Vi’s latest fundraising efforts said, "the telco won’t go down as the government is averse to a duopoly telecom market". He added that Vi’s lenders "are receiving all their dues without even a single day’s delay".

Vodafone Idea's Money Problems

The most pressing matter is the dues that Vodafone Idea needs to pay. It needs to pay ₹22,500 crore between December 2021 and April 2022 towards AGR dues and spectrum allocation. However, its cash balance stood at ₹350 crore on March 31, 2021 and Vi announced a loss of ₹6,985.1 crore for the last quarter of FY 2020-21. The situation looks grim for the telco.

Vi expects to raise up to $1 billion from the sale of a part of its business. The telco still needs more, however.

The telco has asked for a recalculation of its AGR dues. The dues, that currently stand at ₹58,400 crore, are expected to be halved by the telco. Vi said that its calculations puts the dues just above Rs 21,000 crore.

Vi has also warned of risks to viability that hinge on certain financial activities. These include raising funds, successful negotiations with lenders on continued support, refinancing of debt and monetisation of certain assets. The telco had recently written a letter to DoT secretary Anshu Prakash. In the letter, it cited the poor health of the telecom industry having hindered its efforts to raise ₹25,000 crore. It also sought another year's moratorium on spectrum payments.

However, organizations like Telecom Watchdog are against giving any relief to the telco. The NGO said that the telco is "misleading" the government to circumvent paying its statutory dues.