UK-based telecoms Group Vodafone is reportedly preparing to pump equity infusion worth over $3 billion in its India unit to replace debt, even as continues to work on India unit’s initial public offering (IPO). Vodafone India's standalone net debt for 2015-16 was about Rs 81,500 crore.
"Overseas market conditions make it favorable to replace the debt here with equity as the return on equity is higher here and it will cut the debt servicing costs," said one of the people quoted by Economic Times.
Vodafone, which is currently the largest foreign direct investor in the country, is expected to raise Rs 13,300-20,000 crore through its IPO. It is currently reviewing the timelines for this IPO, “wary of value erosion due to a tariff war unleashed by Jio”, people familiar with the matter told the publication.
"The company is evaluating if it should further push back its IPO as the market conditions are bleak for the next few months," one of the people said.
The move coincides with Reliance Jio’s entry, which is expected to shake up the dynamics in the market. Further, the development comes at a time when the telco prepares for the upcoming spectrym auction, where is likely to bid aggressively to increase its 4G spectrum holdings.
Vodafone, which has a total 302MHz spectrum, may spend as much as $2 billion on acquiring spectrum. It has 4G spectrum in nine of the country's 22 circles, and lags behind Jio and market leader Bharti Airtel's pan-India holdings.
Vodafone currently has 19.3% share of the market, according to the Telecom Regulatory Authority of India. It is currently in a dispute over a tax demand of over Rs 14,000 crore, including penalties and interest, related to the acquisition of Hutchison's stake in the company in 2007.
The Indian government will sell spectrum, valued at Rs 5.6 lakh crore at the reserve price, starting October 1, including airwaves in the 4G and 3G bands.