Vodafone Idea calls on PFC and REC to meet its financing needs; funds are required to cover capital and maintenance expenses for three years

New Delhi: Vodafone Idea In recent weeks it has approached state lenders. Power Finance Financial Corporation. (Private First Class) and REC Ltd so that the loans cover medium-term financing needs, according to ET.Top executives of telecom company and parent company Aditya Birla Group (ABG) met senior officials of PFC and its subsidiary REC Discussions have been underway for the past two weeks to bridge a funding gap of ₹25,000 crore, people familiar with the development said.

The infusion is needed to meet the company’s capital expenditure and maintenance costs for the next three years. Vodafone Idea has not yet submitted a formal proposal and state-run NBFCs have not actively considered the plan, the people said.

BB+ rating with stable outlook
The telecom company’s financial profile is a concern for non-banking financial companies (NBFCs), but it has assets that could provide sufficient security for any financing, one of the people said.Vodafone Idea informed the exchanges on June 4 that CARE had upgraded the rating of its long-term bank credit facilities to BB+ and assigned a stable outlook to the company. Securities with this rating are considered to have a moderate risk of defaulting on their financial obligations. Vodafone Idea’s previous rating of B+ indicated a high risk of default. Vodafone Idea is also in talks with the company for partial financing of its needs. State Bank of Indiawhich may lead to a consortium of lenders covering the bulk of the funding, ET reported on June 18. Telecom is on a harmonised list of sub-sectors identified as infrastructure, which the two NBFCs can lend to, apart from power, renewable energy and related projects.

ABG, PFC, REC and SBI did not respond to inquiries.

Business Metrics
Vodafone Idea Ltd is jointly owned by ABG and UK-based Vodafone Group Plc, with the centre holding a one-fourth stake. The telecom firm’s board had in February announced a plan to raise Rs 45,000 crore through debt and equity. It raised Rs 18,000 crore through a follow-on public offer in April.

In a report on the telecom firm released on September 6, Goldman Sachs had flagged a potential for a fall of up to 83% in its share price, sending the stock down 8% to Rs 13.83 on the Boston Stock Exchange. The stock closed at Rs 13.2 on Monday, down 1.2%.

Vodafone Idea has a debt of ₹2 lakh crore, which also includes liabilities and dues to the government.

The company has 200 million subscribers but has yet to launch 5G services. It will need some government debt to be converted into long-term bonds for sustainability. It has also proposed converting some shares into equity, as it has done previously.

In February 2023, the government converted interest earned on adjusted gross revenue (AGR) dues worth Rs 16,000 crore into an equity stake of around 33% in the company. The government’s stake fell to around 24% after the follow-on public offer.