Many experts had expected the UK-based Vodafone Group and India’s Aditya Birla Group to infuse fresh capital into the company in response to the government’s relief package. Meanwhile, Vodafone Idea shares have risen nearly 75 percent since the start of September.
Vodafone Idea may soon see an influx of capital from its promoters. The telecom company is set to receive capital in the form of equity by Vodafone Group and Aditya Birla Group, reported Fortune India. The move from the two promoters of the Indian telecom major comes less than a week after the central government announced its telecom relief package.
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“The company needs to revive the investor confidence first and lift the market valuation before going for any external equity capital,” an executive close to the development told Fortune.
“The government's package was announced just a day back. We are still figuring out what we can do. The decisions relating to equity capital will be taken only at the board level,” another source close to the development added.
Also read: Vodafone Idea not banking on paying dues with equity, team aims to put business back on track
The Vodafone Group and Aditya Birla Group had previously not been willing to infuse additional capital for the debt-ridden company over concerns regarding its stability.
With the government’s new relief package, the promoters have more confidence in the long-term standing of the capital and support from the government. Many experts had expected the UK-based Vodafone Group and India’s Aditya Birla Group to infuse fresh capital into the company in response to the government’s relief package.
Under the relief package, Vodafone Idea, along with other telecom companies like Bharti Airtel, can avail a moratorium on their dues to the Department of Telecommunication (DoT). The debt-ridden company owes the DoT over Rs 96,500 crore in deferred spectrum payments and another Rs 62,000 crore as AGR dues.
With payments against the dues being deferred for the next four years, the company will have access to much-needed cash flow in order to invest in 5G infrastructure to get itself out of the red on its balance sheets. Other measures in the relief package are also expected to lower the stress on telecom companies going forward.
Vodafone Idea had been struggling to raise Rs 25,000 crore but the company will now focus on improving its strategic management and infrastructure from the freed up cash flow, sources told CNBC TV18.
Also read: Telecom relief package: Vodafone Idea, others may be allowed to convert interest into govt equity
(Edited by : Shoma Bhattacharjee)