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Vodafone Idea seeks Rs 23,000 cr term loans and Rs 10,000 cr bank guarantees

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In Short:

Vodafone Idea is planning to borrow Rs 23,000 crore in term loans and Rs 10,000 crore in bank guarantees to boost its infrastructure and compete with rivals like Reliance Jio and Airtel. The company recently lined up Rs 24,000 crore of equity capital to fulfill demands of lenders. Vi’s survival depends on the targeted Rs 55,000-crore capex spending for 4G and 5G rollout. Banks are cautious due to Vi’s regulatory dues and competitive telecom sector.

Vodafone Idea Seeks Rs 33,000 Crore Funding from Banks

Vodafone Idea (Vi) has put forward a proposal to borrow Rs 23,000 crore in term loans along with requesting Rs 10,000 crore in bank guarantees from banks. This move comes as the telco aims to secure the necessary capital expenditure to compete with Reliance Jio and Airtel in the telecom market.

Term Loan Proposal

Vi, a joint venture between Vodafone Plc and Aditya Birla Group, presented the term loan proposal to a State Bank of India-led banking consortium. The funds would contribute towards Vi’s targeted capex funding of Rs 55,000 crore for enhancing 4G coverage and introducing 5G networks in key markets.

Techno-Economic Viability Report

Following the proposal, banks will commission a techno-economic viability (TEV) report to evaluate Vi’s creditworthiness before finalizing the loan approval. The TEV study focuses on assessing the risks related to technology, market conditions, finances, and regulations.

Equity Infusion

Vi recently secured around Rs 24,000 crore in equity capital, meeting lenders’ requirements for extending fresh loans. The telco has been in discussions with banks to raise up to Rs 25,000 crore in debt and Rs 10,000 crore in non-fund based facilities.

Future Challenges

Analysts have highlighted concerns over Vi’s financial outlook, especially regarding its impending regulatory payouts for spectrum and adjusted gross revenue (AGR) liabilities. Vi is exploring avenues to convert government dues into equity in the coming years.

Loan Structure

Vi is seeking a term loan with a longer tenure to align with the life of the assets being financed. While banks have insisted on corporate guarantees due to Vi’s below investment-grade rating, both promoters have so far declined to provide such guarantees.

Despite the funding requirements, some banks remain cautious about increasing exposure to Vi due to uncertainties surrounding the company’s government liabilities and the competitive nature of the telecom sector.

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