Voting advisory firm IiAS has recommended a ‘yes’ vote on the resolution proposed by Vodafone Idea (VIL) to raise Rs 4,500 crore from its promoters.
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“The capital increase provides the company with the necessary funds to meet its payment obligations as well as to repay its contributions and meet its working capital needs,” the IiAS said in a note.
VIL plans to issue 3.38 billion new shares at Rs 13.3 each to its promoters Aditya Birla Group (via Oriana Investments) and Vodafone Group (via Euro Pacific Securities and Prime Metals). The issue price is 25% above VIL’s Monday closing price of Rs 10.07.
The IiAS said the issue price is in line with the formula prescribed in Sebi’s ICDR (Capital Issuance and Disclosure Requirements) regulations. The rule states that the issue price must be the greater of the 90-day volume-weighted average and the 10-day volume-weighted average.
About 40% of the Rs 4,500 crore will be used to make payments to Indus Towers, an associated company that provides passive infrastructure services on a co-sharing basis.
The rest will be used for general corporate purposes.
VIL also plans to raise an additional Rs 10,000 crore in the short term from institutional investors to take on telecom rivals Reliance Jio and Bharti Airtel. This could be raised by a private placement of shares in several or more tranches.
The IiAS also recommended a “yes” vote on the resolution on the issuance of equity-linked securities to raise up to Rs 10,000 crore. The proxy advisory firm said that while the issuance could result in huge dilution, the company would need additional capital to pay off existing debt.
Investment bankers say the successful infusion by the developers will pave the way for a further capital raise of Rs 10,000 crore from private investors. “The developer infusion will boost investor confidence. Already quite a few private equity investors have shown interest,” said an investment banker, who helps listed companies raise additional capital.
Following the infusion of Rs 4,500 crore, the developer’s stake in VIL will rise from the current 72.05% to 74.99%. While the participation of institutional investors will dilute slightly from 5.57% to 4.98%.
Industry watchers say the injection of funds, the telecom sector reform package announced by the government in September 2021 and the tariff hikes undertaken by all players can provide VIL with a new lifeline to compete in the three-player telecommunications industry, which provides essential internet infrastructure to the current country. a digital revolution.
VIL shareholders will vote at the company’s Extraordinary General Meeting (EGM) to ratify the two resolutions relating to raising funds of Rs 14,500 crore and six others. The voting period begins March 22 and ends March 25. The IIAS recommended a “yes” vote on all eight resolutions.