Banks headed by the State Bank of India (SBI) have reportedly agreed to fund the debt to give Vodafone Idea Ltd more financial legs to work with to shore up its business and do better business to business (b2b) competition in India’s highly competitive telecom sector.
The consortium also comprises Union Bank of India Ltd. and the National Bank for Financing Infrastructure and Development (NaBFID), people with knowledge of the deal said. They asked to remain unnamed since details about the financing have not yet been released.
India’s third largest wireless telecom by its subscriber base probably ‘Vodafone Idea’ is likely to use a portion of funds to upgrade and expand its network. A potential investment may boost its services and provide it a better chance at global competition with other giants like Bharti Airtel and Reliance Jio Infocomm.
It is reported that there are certain conditions in this proposed financing. These include billionaire Kumar Mangalam Birla continuing as the chairman of its conglomerate – Vodafone Idea – for the almost nine years of the loan. Lenders have also requested guarantees the loans can be collected in the event of a default, said sources who spoke on the condition of anonymity.
Vodafone Idea and the participating banks did not immediately make any comment on the financing reported.
The company has faced high pressure with regard to finance in recent years. But additional breathing room has been given to them by government measures. Authorities recently restricted some of the past payments associated with spectrum, thus enhancing the company’s investment wooing powers.
Last year, the government had also restructured the outstanding dues of actors of the telecom major, Vodafone Idea, into equity, making its stake in the firm 48.99% against 22.6%.
Vodafone Idea’s loss of Rs 37.5 billion in the quarter ended June was the smallest it expects to incur in the quarter, adding to optimism the operator will improve its financial health through raising fresh capital.