Vodafone Idea plans to raise funds via convertible debenture issuance

NEW DELHI: Vodafone Idea (ViL), India’s third-largest telecom operator, is planning to raise funds via the issuance of convertible debentures. The loss-making telco, without divulging any details about the quantum of fundraising, said it will put up this proposal in the next board meeting on October  21, 2022. 

The company desperately needs funds to invest in its 5G infrastructure and compete with its cash-rich Reliance Jio and Bharti Airtel. The telco has been trying to raise funds for the past two years but failed to woo any investors so far.  

“We wish to inform you that a meeting of the board of directors of the company is scheduled to be held on October 21, 2022, inter-alia, to consider and evaluate a proposal for issuance of debenture securities convertible into equity shares on a preferential/private placement basis to a vendor,” Vodafone Idea said in its exchange filing.

A convertible debenture is a long-term debt under which the debentures can be converted into equity after a specific period. Usually, there is no collateral that backs up the debt. Meanwhile, its competitors Reliance Jio and Bharti Airtel have already started their 5G services in many cities; Vodafone Idea is yet to give its 5G timeline.

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Aditya Birla Group Chairman Kumar Mangalam Birla, while speaking at the launch of 5G services in the country said Vodafone would start the 5G roll-out soon. 

“We will soon begin the 5G roll-out journey. We will leverage our strong presence in rural India, our enterprise customers, our tech partners, and the global experience of Vodafone Group for progressively rolling out our 5G network and services in the coming period,” said Birla.

In the last quarter, Vodafone Idea reported total debt of Rs 1.98 lakh crore. The company reportedly owes Rs 7,000 crore on Indus Tower, and it is pressuring the telco to clear its dues. There is also no clarity from the government side when it is going to convert its spectrum dues into equity. 

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VIL had opted for converting government dues into equity, after which the government will hold nearly 33 per cent of the company. Meanwhile, the telco continued to lose its subscribers, in August 2022 it lost 19.6 lakh subscribers to its rivals.