To further strengthen its India business, Vodafone Group Plc is considering selling a small portion of its 28.12% stake in Indus Towers to inject capital into its tottering telecom joint venture, Vodafone Idea (Vi).
The move comes at a time when Indian players like Jio and Airtel are strengthening their competency via continued investment. Also, there are regulatory changes happening with the advent of new spectrum auction and the onset of 5G.
According to sources familiar with the development, Vodafone Idea’s potential global lenders are pressing the telco’s co-promoters – the UK telecom major and India’s Aditya Birla Group – for some capital infusion to improve their overall competency in the market at all levels.
The development is happening is primarily due to the decision of Vodafone Group established policy of not going for further fresh fund infusion to its India business. So the company believes if the stake at its recently listed Indus Towers is a best bet to find the fresh capital for strengthening VI’s presence in the market.
Analysts from Arvian Consulting also says that it will help the British teco company to assure its existing investors and other shareholders that its financials are strong enough and the new infusion in the India business is by availing separate telecom-related investment in India.
According to sources, formalising the final funding terms, leading to a binding term sheet, is expected next month, but the timeline also depends on how soon one or both promoters signal intent to infuse funds into the cash-strapped Indian telco.
Investment firm Oak Hill Advisors is believed to be leading a consortium including GoldenTree Asset Management, Pacific Investment Management Co, Sixth Street, Twin Point Capital and Varde Partners to provide an around $2 billion (Rs 14,600 crore) credit line to Vi. They are expected to invest through a mix of convertible instruments, comprising bonds and warrants with a linked equity option that will allow them to convert a portion of the debt into shares.
Following the recent merger of erstwhile Bharti Infratel and Indus Towers, the Vodafone Group now owns 28.12% in the tower entity. Bharti Airtel effectively controls the tower company with a 41.72% stake, while private equity firm KKR and Canada Pension Plan Investment Board own a combined 7.1% stake. The balance is held by public shareholders.