Vodafone explores partial stake transfer in India unit
What's the story
Vodafone Group Plc, the UK-based telecom giant, is mulling a plan to bolster the capital of its Indian subsidiary, according to Bloomberg. The move comes after the Indian government cut a bill for unpaid spectrum fees. Vodafone currently holds a 19% stake in Mumbai-listed Vodafone Idea (Vi) and is considering transferring part of this shareholding to the Indian company. This would be done in lieu of Vodafone injecting more cash into the business.
Financial impact
Proposed share transfer could improve balance sheet of Vi
The proposed share transfer could significantly improve the balance sheet of loss-making Vi. It would also help the company in its ongoing efforts to raise debt. The company is currently negotiating with lenders for a loan of about ₹35,000 crore ($3.7 billion). State Bank of India (SBI) is likely to lead a consortium for this debt, which will mostly be in the form of term loans.
Strategic move
Vi hopes to regain market share from competitors
Once the share transfer is complete, Vi could sell these shares in the future. This would give it additional capital to pay off government dues and invest in growth. The company hopes to regain market share from competitors such as Reliance Jio Infocomm Ltd. Currently, the Indian government holds a 49% stake in Vi while billionaire Kumar Mangalam Birla's Aditya Birla Group has a minority stake.
Information
Shares surged nearly 68% in last 1 year
Vi's shares have surged nearly 68% in the last one year, taking its market capitalization to $12.9 billion. The company is working on the details of the proposal, and the structure of the deal could change.