Vodafone Idea seeks ₹35,000cr loan to meet capex needs
What's the story
Vodafone Idea (Vi), one of India's leading telecom service providers, is in the process of forming a consortium of eight to 10 lenders. The company is looking to raise a ₹35,000 crore loan with a 10-year maturity period. This move comes as part of Vi's plans to fund its capital expenditure over the next decade.
Loan distribution
SBI to take a 20% exposure in the loan
The State Bank of India (SBI), India's largest bank, has agreed to take a 20% exposure in the loan. This translates to an investment of around ₹7,000 crore.
The remaining amount will be shared among other public and private sector lenders, each taking a minimum of ₹1,500 crore.
SBI has assessed that Vi would need loans worth about ₹35,000 crore.
Funding needs
Vi will need ₹60,000cr to upgrade services
Vi will need a total of ₹60,000 crore to upgrade its services.
This means some of the money will have to come from internal accruals or equity infusion later.
SBI has also laid down certain conditions for this loan. These include that any shortfall in investments above the bank loan amount during this period will be managed by Vi itself.
Loan oversight
Conditions laid down by SBI
SBI will have an oversight over Vi's cash flows and all funds will be routed to their accounts.
The bank has also stipulated that the Aditya Birla Group has to maintain its equity stake in Vi after converting its warrants and rights.
There is also a comfort guarantee from a group company as part of the loan conditions.
Equity details
Aditya Birla Group's stake in Vi
The Aditya Birla Group and its affiliates currently own about 6.64% in Vi, making them the third-largest shareholder after the Government of India (GoI) and Vodafone (19%).
The government now owns 49% of the telco after converting some dues into equity.
Banks wanted assurance from the group that Vi and its creditors won't be left stranded if things don't go as planned.
Consortium members
Other banks likely to be part of the consortium
The National Bank for Financing Infrastructure and Development (NaBFID) is likely to be the second-largest lender in this consortium with an exposure of about ₹4,000 crore.
Other public sector banks such as Punjab National Bank, Canara Bank, Bank of Baroda and Union Bank of India are also in talks with Vi.
Large private sector banks like ICICI and HDFC are also in touch.