Kumar Mangalam Birla may infuse his own capital into Vodafone Idea

Billionaire and Aditya Birla Group chairman Kumar Mangalam Birla is likely to infuse a token sum of fewer than ₹1,000 crores into Vodafone Idea, responding to the Centre’s reform package that was mostly meant to revive the struggling telecom sector.

“Much of the funds will have to come in from external sources. KM Birla will put in some money, but not a significant sum while Vodafone is unlikely to pump in more money (from the UK group). Monetising the assets in Indus is really the plan,” a top official close to the Vodafone Group had mentioned to Economic Times.

“Clearly, investors want both the promoters to put their money where their mouth is. It is only after that that external fund-raising will happen,” the official included in his statement.

In the past year, the firm tried to raise funds from investors from outside because of its worsening financial condition and uncertainty about the Centre announcing measures to provide help to the cash-strapped telco. Although, the attempts were unsuccessful. Vodafone Idea had also declared a plan to raise at least ₹25,000 crores by September 2020.

Vodafone Group owns 45% of Vodafone Idea, and the Indian promoter group, which comprises of Kumar Mangalam Birla and Aditya Birla Group firms, holds a 26% stake.

Vodafone Idea’s present market valuation is ₹31,000 crore. The telco also has to repay ₹9,000 crore of loans to banks by the end of this fiscal, containing ₹5,000 crore of non-convertible debentures.

Vodafone Idea’s gross liabilities, in addition to regulatory dues, stood at around ₹1.9 trillion as of 31 March.

The firm owes a total of ₹48,000 crore to eight banks, headed by the State Bank of India. Of this, borrowings add up to ₹23,000 crore, and the residual is in the form of bank guarantees.

Birla, who has quit as the chairman of Vodafone Idea Ltd, had earlier sought the Central Government’s support and had also proposed to give up his stake in Vodafone.

Vodafone Idea has consistently made annual losses after March 2016 — since the entry of Mukesh Ambani’s Reliance Jio that same year. Jio debuted with ultra-low prices, compelling rivals to quit, merge, or be bankrupt.

Of all the renowned companies operating in the country’s telecom sector, Vodafone Idea Limited (VIL) is facing the most massive financial crisis and requires urgent relief.

If the government’s telecom relief package meets expectations, it could provide $1 billion in annual relief to VIL.

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