Vodafone Idea Managed To Raise Capital To Meet Fund Needs

Last Wednesday, Vodafone Idea, India's largest telecommunications company regarding the number of subscribers, announced that it would meet funding requirements through various capital infusion plans and its 25,000 crore rupee rights issue.

According to Akshaya Moondra, Vodafone Idea Ltd's chief financial officer, the company is accumulating capital by raising money from its shares at Indus Towers to increase liquidity. The company managers believe that these amounts will be sufficient to meet the funding they need in the near future. Besides, they can also earn a little extra money from their cable network business.

The company currently has 1.58 lakh km of fiber optic network throughout the country. The plan to sell 11.15% of their shares of Indus Tower in the next three to four months is expected to earn 5,500 crore rupees. However, this still depends a lot on Bharti Infratel's stock price.

In April last year, Vodafone Idea Ltd signed a contract with Bharti Infratel. It states that the company had the right to sell its shares at Indus Tower to earn money ahead of the merger between Infartel - Bharti Group.

Earlier, Moondra said he hoped that the rights issue would be completed and fully registered. Early morning shares of Vodafone Idea rose slightly at 17.10 rupees.

According to the company, the 25,000 rupee crore fundraising will help them create a strong enough market and capitalization in the fierce competition in the Indian telecom market today with many low-cost service packages. But analysts do not think so.

Nitin Soni, director of Fitch Ratings, said Vodafone's idea was risky because their Ebitda dropped to nearly $650 million (equivalent to 4,455.8 crores). Their current debt was pretty high, plus, their leverage measured by debt-to-Ebitda was equally high. Soni claims this amount is not enough to invest in the company's plan; if they want to follow what they have set out, they need to raise 3.5 to 4 billion USD. Therefore, they may need more equity, additional shares, or sell more of their assets to achieve their desired goals.

Vodafone Idea and Airtel, the two giant telecom operators, are facing a threat and competition from Reliance Jio. The company is currently having 300 million subscribers after just over two years of operation and secures the third position in the telecommunications sector. Reliance Jio has a fantastic speed of development because it offers good quality 4G service at a low price.

Vodafone Idea is still the country's most registered telecommunications operator, but it has also lost 57.87 lakh users, and this has caused its number of subscribers to shrink to 40.93 crores. Data collected by TRAI also showed that Bharti Airtel's subscriber numbers also dropped from 49,895 to 34.03 crore by the end of February.