Vodafone Idea Secures In-Principle Nod for Rs 14,000 Crore Loan from SBI-Led Consortium

A group of lenders, spearheaded by the State Bank of India (SBI), has granted preliminary approval for a ₹14,000-crore loan to Vodafone Idea (Vi). This funding aims to assist Vi in revamping its struggling business by implementing various strategies, including the introduction of 5G services.

Although an official announcement has not yet been made, the joint venture between Vodafone Group Plc and Birla’s conglomerate has secured informal commitments from several lenders. These include Punjab National Bank (PNB), Bank of Baroda, Union Bank, as well as other public and private sector banks, according to sources familiar with the matter who spoke to Moneycontrol.

The consortium plans to release the funds in installments once the transaction is finalized. The money will be allocated to repay operational creditors, launch a 5G network, and bid for additional spectrum. According to sources, the telecom company is also vigorously aiming to raise ₹25,000 crore following a successful follow-on public offering (FPO).

On May 17, Vi CEO Akshaya Moondra disclosed that banks required the telecom operator to secure equity funding before approving loans. The company’s overall strategy involves raising ₹25,000 crore in equity and acquiring additional non-fund-based facilities of up to ₹10,000 crore.

"We've been engaged with the banks for a long time, and it was their ask that first the equity raise should be completed, so we've done that. We have started engagement with the banks again…we have some capital available, and we'll be able to close the discussions with the banks in good time," Moondra said during an earnings call on May 17.

Vi has significantly lowered its total bank debt from a peak of ₹40,000 crore to approximately ₹4,000 crore. The company has requested lenders to release funds in proportion to the equity infusion obtained through its ₹18,000 crore follow-on public offering (FPO) in April this year. This FPO was oversubscribed by more than six times, attracting investors such as GQG Partners and Citigroup Global Markets.

On May 8, Vi's shareholders sanctioned a preferential equity infusion of ₹2,075 crore from an Aditya Birla Group (ABG) entity. Combined with the preferential equity raise of ₹494 crore in 2022 from Vodafone Group and ABG, the total fund infusion by both promoter groups amounts to ₹7,000 crore between March 2022 and May 2024.

Vodafone Idea Ltd. announced on Monday that its board will convene on Thursday, June 13, to consider and assess proposals for issuing either equity shares or convertible securities on a preferential basis to vendors. Such an issuance may require approval from the company's shareholders.

Vodafone Idea recently concluded the largest Follow-on Public Offer (FPO) in India, generating ₹18,000 crore from the exercise. Additionally, it raised ₹2,075 crore from its promoters through a preferential share issuance. This brings the total equity fundraising effort to ₹20,000 crore.

Last month, brokerage firm UBS upgraded Vodafone Idea from its prior "neutral" rating to "buy." In its note, the brokerage indicated that the market is anticipating a tariff increase of 15% to 20% within the next 12-24 months.