Vodafone Idea to Reduce Debt by Issuing Preferential Shares Worth ₹2,458 Crore to Nokia and Ericsson

Vodafone Idea Ltd. has taken a significant step towards debt reduction by issuing preferential shares worth ₹2,458 crore to two key vendors, Nokia Solutions and Networks India Pvt. Ltd. and Ericsson India Pvt. Ltd. This move is expected to bolster the company's financial stability and support its infrastructure development for 4G and 5G networks.

 

Topic to be covered:

• Key Highlights
• Statement from Vodafone Idea's CEO
• Market Reaction
• Conclusion

Key Highlights:

• Preferential Issue Details:

  • Vodafone Idea will issue 166.07 crore shares in one or more tranches worth up to ₹2,458 crore.
  • Nokia Solutions and Networks India Pvt. Ltd. will receive 102 crore equity shares at an issue price of ₹14.8 apiece, amounting to ₹1,520 crore.
  • Ericsson India Pvt. Ltd. will be allotted 63.37 crore equity shares at the same price, totaling ₹938 crore.

• Issue Price and Discount:

  • The issue price of ₹14.8 per share represents an 8% discount to Thursday's closing price.
  • The allotment price is 35% higher than the Follow-on Public Offer (FPO) issue price and comes with a six-month lock-in period, preventing the entities from selling these shares during this period.

• Impact on Ownership:

  • Post-issue, Nokia and Ericsson will own 1.5% and 0.9% equity in Vodafone Idea, respectively.
  • Promoter stake will be 37.3%, while government shareholding will be 23.2%.

• Financial Strategy:

  • Vodafone Idea aims to use the funds from this preferential issue to clear part of its outstanding dues.
  • The company has raised nearly ₹24,000 crore through equity, including ₹18,000 crore from the FPO and other strategic financial maneuvers.

• Future Plans:

  • Vodafone Idea is in "active discussions" with lenders to raise additional debt funding of ₹25,000 crore.
  • The company plans to invest in its 4G and 5G network rollout, contributing to India's digital transformation.

• Subscriber Base:

  • As of March 2024, Vodafone Idea had a subscriber base of 212.6 million.
     

Statement from Vodafone Idea's CEO

"As Vodafone Idea embarks on its growth journey, support from key stakeholders is critical, and the agreement with Nokia and Ericsson reaffirms these vendors as long-term partners of the Company, and sets the stage for the next phase of our growth," said Akshaya Moondra, CEO of Vodafone Idea.

Market Reaction

Shares of Vodafone Idea trading at  0.37% at the price of ₹16.13. The stock has seen a decline of 5.18% in 2024 so far.

Conclusion

This strategic move by Vodafone Idea to issue preferential shares to Nokia and Ericsson is a clear indication of the company's commitment to reducing debt and enhancing its network capabilities. By securing long-term partnerships with key vendors and actively pursuing additional funding, Vodafone Idea is positioning itself for sustainable growth and a significant role in India's digital transformation.