Vodafone Idea Can Use Only 1/4th Of Latest Fresh Capital Infusion For Capex: Report

Vodafone Idea (Vi) can use only 25 per cent of its Rs 4500 crore worth fresh capital infusion for capital expenditure purposes, Economic Times reports.

Apparently, the telecom operator requires a larger dose of equity financing to invest at least Rs 20,000 crore on its network in the next two years. Only then will Vi be able to bolster its competitiveness and also increase its average revenue per user (ARPU) growth.

Back on Thursday, the company’s board gave its approval to a plan to raise Rs 4500 crore from its promoters through a preferential allotment. It also gave its clearance to an additional fundraise of Rs 10,000 crore from external investors.

“The equity infusion is inadequate (as) effectively, only 25% of the Rs 4,500 crore infusion from promoters, representing ABG’s share of Rs 1,125 crore, would be available unencumbered to Vi as almost the entire infusion from Vodafone Plc (read: Rs 3,375 crore) will be used to clear Vi’s existing overdue balance with Indus Towers,” global investment bank Credit Suisse’s statement was quoted by the aforementioned publication.

Financial services company IIFL Securities also revealed that Vi will be left with only Rs 1000 crore-Rs 2000 crore from its latest equity infusion to invest in its network.

“Considering Vi's current net debt of Rs 1.97 lakh-crore (30.5x leverage ratio), the deleveraging would be miniscule, and the ability to raise the annualised capex rate from the current Rs 4,000 crore would be limited,” IIFL further explained.