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Vodafone Idea considers offering more shares to vendors to settle dues

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In Short:

Vodafone Idea plans to offer more shares to Nokia and Ericsson to clear dues. They plan to raise Rs 2,458 crore through a share issue. Vi aims to pay part of their dues by 2024. Analysts predict possible further share dilution to vendors. Vi owes around Rs 20,000 crore in payables. Tower vendor Indus may struggle to recover Rs 10,000 crore dues as Vi can’t issue shares due to Airtel’s ownership in Indus.


Vodafone Idea (Vi) Considering Offering More Shares to Nokia and Ericsson

Vodafone Idea (Vi) is reportedly considering offering more shares to its vendors, including Nokia and Ericsson, to clear its remaining legacy operational dues, as per analysts. This move comes after Vi announced plans to raise up to Rs 2,458 crore through a preferential share issue to Nokia and Ericsson to settle a portion of their pending dues.

Financial Details

Vi plans to make payments of Rs 1,140 crore and Rs 703.5 crore to Nokia and Ericsson, respectively, by end-September 2024. The remaining balance of Rs 614.5 crore will be utilized for general corporate purposes by end-December 2024. Analysts suggest that while this fundraise will help in part-paying the dues, further dilution of shares to vendors could be a possibility in the future.

Vi’s Financial Situation

Vi currently has around Rs 20,000 crore in overall payables, including Rs 13,731 crore in trade payables. The recently raised equity capital of Rs 24,000 crore is earmarked for new capex to enhance 4G coverage and launch 5G networks. Trade payables primarily represent Vi’s dues to vendors, including network gear suppliers and tower firms.

Implications for Nokia and Ericsson

Prior to the preferential share issue, Vi owed over Rs 1,200 crore to Ericsson and approximately Rs 3,000 crore to Nokia. Post the share issue, Nokia and Ericsson will hold 1.5% and 0.9% stakes in Vi, respectively.

Challenges for Tower Vendor Indus

Analysts anticipate challenges for tower vendor Indus in recovering its backlog of old dues from Vi, estimated to be around Rs 10,000 crore. Vi cannot issue shares to Indus against past dues due to Bharti Airtel’s significant stake in Indus, which would lead to indirect ownership by Airtel in Vi, not permitted under India’s telecom laws.

Queries to Vi, Nokia, and Ericsson remained unanswered at the time of press.

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