Vodafone Idea shares rose as much as 2% in Mumbai on Friday, significantly outperforming the 1% drop in the Sensex Index, as reported by Business Standard. This represents a substantial improvement from the previous day's modest gains, with the stock trading at ₹14.98 at around 11:21 am on Friday, gaining ₹0.08 or 0.54% as reported by Goodreturns. The funding proposal has given the debt-laden telecom operator a fresh trigger as investors assess whether additional bank funding could provide greater financial flexibility to accelerate network expansion and strengthen its turnaround prospects.
State Bank of India is likely to soon issue a sanction letter for its portion of funds to Vodafone Idea, according to sources familiar with the matter. This move is expected to prompt other lenders involved in the discussion to move forward with their decision to back the company. However, SBI will release the funds only after Vi ties up the financing with other participating lenders. The funding process is moving in the right direction, with the entire package expected to see the light of day soon, as confirmed by sources. Earlier, SBI had agreed to sanction its share of the loan after Vodafone Idea agreed to provide guarantees through its promoter companies, which had been a sticking point that led to a deadlock.
According to Business Standard reports, a group of lenders led by State Bank of India agreed to provide about $3.5 billion of debt financing to Vodafone Idea Ltd. to help the mobile telephone operator rebuild its business. The proposal covers around ₹35,000 crore, including ₹25,000 crore in funded facilities and ₹10,000 crore in non-funded facilities. SBI is likely to give 20% share (₹7,000 crore) of the total funding, while the remaining amount is expected to come from other lenders involved in the discussions. These include state-owned banks such as Bank of Baroda, Union Bank of India and Canara Bank, along with a few large private sector lenders and the National Bank for Financing Infrastructure and Development (NaBFID).
As reported by Business Standard, Vodafone Idea plans to use some funds to improve its network and better compete with Bharti Airtel Ltd. and Reliance Jio Infocomm Ltd., positioning itself to strengthen its market position among India's top three wireless operators. The ₹35,000 crore of fresh funding would support the company's ₹45,000 crore capital expenditure plan over the next three years. This plan includes rolling out 5G network across 17 priority circles, tripling its earnings before interest, taxes, depreciation, and amortisation (Ebitda) and shoring up customer base to ensure revenue generation. The company, which is part-owned by the UK's Vodafone Group Plc, has been working on raising debt to get on a firmer footing, with the debt fundraising effort aligning with Vodafone Idea's ongoing push to secure its financial footing.
Indian authorities earlier this year provided Vodafone Idea with significant support measures to improve its financial position. The government converted about ₹37,000 crore of outstanding dues into equity, lifting the government's stake to 48.99% from 22.6%. These interventions have boosted the company's stock, driving a nearly 40% gain this year and pushing Vodafone Idea's market value to ₹1.6 trillion. The ownership structure is complex, with Vodafone Group owning about 19%, the Birla Group owning 6.6%, for approximately 26% combined, while the government's converted equity represents 49%. The Government of India owns around 49% stake, but is classified as a public shareholder rather than a promoter. The government's position as the company's largest shareholder following the conversion of dues into equity has provided some confidence to the market, though lenders are still expected to evaluate the proposal on commercial viability and cash-flow generation.
