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Vodafone’s Indian business has raised $2.2bn through an equity issue, staving off fears that the telecoms operator would collapse under a mountain of debt.
The public offering was considered a matter of survival for lossmaking Vodafone Idea, India’s third-largest carrier, which has been unable to invest in its network as it sags under a Rs2.1tn ($25bn) debt burden. It drew in investors including US investment group GQG Partners and asset manager Fidelity.
The follow-on share sale — India’s largest ever — was more than six-times subscribed as bidding in a range of Rs10-Rs11 a share ended on Monday, according to local exchange data. Shares of Vodafone Idea closed at Rs12.89.
Vodafone Idea was formed in 2018 as a joint venture between the UK telecoms company’s Indian unit and the Mumbai-based conglomerate Aditya Birla Group, after the disruptive entrance of Jio, the operator owned by Asia’s richest man Mukesh Ambani. A brutal price war ensued, which cut down most of the some dozen telecom groups in India.
The merger failed to turn around the business and Kumar Birla, the billionaire head of Aditya Birla, stepped down as chair of Vodafone Idea in 2021, warning that the mobile operator was close to “an irretrievable point of collapse”.
UK parent Vodafone ruled out further support for the unit and wrote off the value of its investments, while India’s government bailed out Vodafone Idea and became its main shareholder. Officials in New Delhi have voiced concern at the prospect of a potentially uncompetitive sector and a duopoly between Ambani’s Jio and Bharti Airtel.
Since then, Birla has returned to Vodafone Idea’s board and his conglomerate this month committed to injecting about $240mn into the company, which has fallen behind as the top two operators have ploughed ahead with installing 5G networks across the country.
Vivekanand Subbaraman, an analyst at Ambit Capital in Mumbai, described the fundraising as “a much needed shot in the arm” for Vodafone Idea, which shed 1mn active subscribers in February, a third straight month of losses.
“They are not out of the woods yet,” Subbaraman said, pointing to about $8bn it will owe New Delhi soon after a moratorium on historic dues expires in September 2025. But “with government backing, Mr. Birla’s return to the company’s board and equity funding, banks too will probably lend money”, he added.
In a January call with analysts, Vodafone Idea’s chief executive Akshaya Moondra said the company was engaged in a “fine balancing act” between its need to invest and service its debt.
Vodafone Idea said in February that it planned to raise about Rs450bn in equity and debt, which it would use to catch up with its rivals by launching its own 5G services, as well as expand its existing 4G network.
But Deepak Shenoy, founder of Bengaluru-based wealth manager Capitalmind, who has invested in Vodafone Idea’s rivals, said the amount raised was unlikely be enough to turn around the group’s fortunes.
“This gives them some breathing room today, but what happens tomorrow when the government demands their share of the money?” he said.
A spokesperson for Vodafone Idea did not immediately respond to a request for comment.
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