Vodafone Idea's Massive Fundraising: Is it a Fresh Start for the Telecom Giant

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vodafone ideas massive fundraising is it a

Vodafone Idea (Vi), the third-largest telco in India, has raised Rs 20,000 crore through equity. Rs 2,000 crore came through a promoter entity while the remaining Rs 18,000 crore through the largest FPO (follow-on public offer) the country has ever seen. It has not been an easy journey for Vi to raise capital. While the FPO will bring in additional capital, it will reduce the earnings per share (EPS) for the old investors. However, from a long-term perspective, FPO can still be good for the company.

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It is not a secret that Vodafone Idea was in desperate need of funds. While the Rs 20,000 crore will come in handy over the short term, the telco needs to vitalise its fundamentals to sustain itself in the long run. In FY22, the telco opted for a moratorium period of four years for the adjusted gross revenue (AGR) and spectrum usage charges (SUC) dues. The payments will start in FY26, which is only a year away. It will be a lot of cash outflow for Vi, as it won’t just have the fresh dues, but also the old dues.

Thus, it would need more cash in hand to pay off the dues. Will the current level of revenues help Vi in doing that? It is hard for me to answer, as that’s for analysts to discover. (Kotak Institutional Equities estimated that Vi’s annual payouts would be around Rs 43,000 crore after the moratorium period ends).