Vodafone Idea Seeks to Settle Debts and Bolster Liquidity with Potential Share Issuance

Vodafone Idea Ltd (VIL), India’s leading telecom operator, announced a crucial board meeting scheduled for Thursday, June 13, 2024. The agenda centres on proposals for issuing equity shares or convertible securities to vendors on a preferential basis. This move signifies Vodafone Idea’s proactive approach to addressing outstanding dues and strengthening its financial position.

Addressing Vendor Dues

The potential issuance of shares or convertible securities serves a strategic purpose. It aims to settle outstanding payments owed to vendors, a critical step towards maintaining healthy supplier relationships and ensuring continued network operations.

Building on Recent Fundraising Success

This development follows Vodafone Idea’s successful completion of India’s largest Follow-on Public Offer (FPO) in May 2024, raising ₹18,000 crore. Additionally, the company secured ₹2,075 crore through a preferential share issuance to its promoters, bringing their total equity fundraising to ₹20,000 crore.

Strengthening Financial Health

The potential issuance of equity or convertible securities represents a further step in Vodafone Idea’s ongoing efforts to improve its financial health. This move comes just over a year after the company issued ₹1,600 crore worth of Optionally Convertible Debentures (OCDs) to ATC Telecom Infrastructure Pvt. Ltd. in February 2023. In April 2024, a portion of these OCDs (₹1,440 crore) were converted into equity shares, which were subsequently sold by ATC Telecom.

Positive Market Outlook

Vodafone Idea’s recent actions have been met with optimism from the financial sector. In May 2024, brokerage firm UBS upgraded their rating on Vodafone Idea from “neutral” to “buy.” This upgrade reflects growing confidence in the company’s future prospects, with analysts anticipating a potential tariff hike in the telecom industry within the next 12-24 months.

Previously, Care Ratings Limited (CARE) revised its rating assigned to the Long-Term Bank Facilities and Short-Term Bank Facilities of Vodafone Idea Limited. Long-term bank Facilities possess a revised rating of CARE BB+ (Outlook: Stable) from CARE B+ (Outlook: Stable), while short-term bank Facilities have received a revised rating of CARE A4+.

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