Vodafone Idea: Cash-strapped Vodafone Idea looks to monetise assets to raise $1 billion – The Economic Times

Clipped from: https://economictimes.indiatimes.com/industry/telecom/telecom-news/cash-strapped-vi-looks-to-monetise-assets-to-raise-1-billion/articleshow/84130668.cmsSynopsis

The telco needs to pay Rs 22,500 cr between December 2021 and April 2022 toward a mix of regular debt, adjusted gross revenue and spectrum dues. Its cash balance stood at Rs 350 crore on March 31 and loss was Rs 6,985.1 crore for the March quarter.

Vodafone IdeaNSE 3.41 % (Vi) is hoping to raise up to $1 billion (around Rs 7,400 crore) from sale of its fixed line broadband subsidiary, optic fibre unit and data centres business, as it seeks to ease its cash crunch and generate funds to meet upcoming liabilities.

The telco needs to pay Rs 22,500 crore between December 2021 and April 2022 toward a mix of regular debt, adjusted gross revenue and spectrum dues. Its cash balance stood at Rs 350 crore on March 31 and loss was Rs 6,985.1 crore for the March quarter.

The company has been trying, for the last nine months, to close a Rs 25,000 crore fundraise through a mix of debt and equity, but has struggled, despite several rounds of discussions with numerous investors.

Vi chief financial officer Akshaya Moondra, at an analyst call last week, said the telco expects to generate an additional Rs 3,000 crore in cash this fiscal year from tax refunds and sale of land parcels that were bought for data centres.

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Sale and Leaseback
Vi did not respond to ET’s queries.

“Vi is expecting between $800 million and $1 billion (from the broadband, optic fibre and data centre sales) but investors are not very keen at these price points,” said an investment banker aware of the development.

A second person said that the proposed fibre asset sale could happen on a “sale and leaseback model,” in which the telco basically sells the fibre assets and takes the capacity on long term lease from the buyer.

“The valuation would hinge on the tenure of lease arrangement that Vi enters with the potential buyer, and how much it pays as monthly rentals towards lease charges,” the person added. But for this, the buyer needs to be sure of Vi’s long-term viability.

“Talks have been on and off…,” said a third person aware of discussions.

The country’s third-largest telco, with about 267.8 million customers, has one data centre in Navi Mumbai and 160,000 km of optic fibre. Its fixed line broadband business is housed under a subsidiary, You Broadband, which it acquired from TRG Capital in 2017 for Rs 400 crore. You Broadband is available in 21 cities and has 3,000 km of optic fibre and 6,000 km of last-mile cables.

Vi had tried to sell the fibre assets and data centre business back in 2019, but talks had fallen through owing to valuation differences. However, industry insiders say the telco is more desperate to sell now, given its precarious financial condition.

Concerns on Viability
The JV UK’s Vodafone Group Plc and India’s diversified Aditya Birla Group has, in a letter to the telecom department, flagged its financial struggles. It sought deferment of spectrum dues of Rs 8,292 crore by a year. It said its operations were not generating adequate cash and the stress in the industry due to ‘below cost’ tariffs was scuttling its efforts to raise the Rs 25,000 crore it announced last September.

In its fourth quarter earnings report, Vi has once again flagged concerns around its viability if it is unable to raise funds, monetise some assets or negotiate better terms with lenders. The telco said it had classified Rs 8,547.2 crore under ‘current maturities of long-term debt,’ moving it from ‘non-current borrowings’ for “not meeting certain covenant clauses under the financial agreements for specified financial ratios as at 31 March 2021.”
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