Vodafone Idea Ltd's shares in focus on Thursday morning after the telecom operator said that its board of directors will meet on Monday, December 9, to consider raising capital of up to Rs 2,000 crore. Furthermore, parent company Vodafone PLC said that it is selling its whole 3% remaining investment, or 79.2 million shares, in Indus Towers, which is held by Omega Telecom Holdings Private Limited (2.26%) and Usha Martin Telematics (0.74%), through an accelerated book build offering.
Vodafone PLC stated that the proceeds from the placement will be used initially to repay Vodafone's outstanding borrowings of $101 million to existing lenders, which are secured by Vodafone's Indian assets.
"Under the terms of the security arrangements entered into between Vodafone and Indus (the Security Arrangements), Indus has a security over the residual proceeds from the placing to guarantee obligations from Vodafone Idea Limited (Vi) to Indus under the Master Services Agreements (MSAs)," according to a statement.
Vodafone Idea said it intends to raise Rs 2,000 crore through the preferential issuance of convertible instruments and/or equity shares to one or more organizations connected to Vodafone group promoters.
"Vi plans to utilize the money from the capital issue to settle Indus' unpaid MSA dues. Following the settlement of Vodafone's outstanding borrowings, any Indus Shares remaining, as well as any profits not used by Vodafone to subscribe to additional shares in VIL, would be available to Indus to guarantee VIL's obligations under the MSAs," it stated.
Indus Towers announced in a release that it has withdrawn the promise on 3.003 percent of the company's shares held by Vodafone promoters, allowing the relevant Vodafone promoters to sell such shares and use the proceeds in accordance with the conditions of the security package supplied by Vodafone promoters.
"With Vi's substantial capex plans, we expect the pace of market share growth would decrease. However, we believe RJio and Bharti will continue to gain market share at Vi's expense. We continue to prefer Bharti and RIL in the telecom space," MOFSL stated in a note.
