The stock of Vodafone Idea rallied by over 25% on Thursday, a day ahead of the company’s board meeting, on reports that Amazon and Verizon are looking to resume talks to pick up a stake in the company.
According to Mint, the two companies are looking to pick up a stake for more than $4 billion. The stake sale was reportedly paused because the court’s decision on the AGR matter was awaited. The survival of Vodafone Idea was at stake if the court decided to not to give the telecom companies time to pay off their dues.
Vodafone Idea presently owes Rs 50,400 crore in licence fees, spectrum usage charges, interest and penalties. This is after it has paid off Rs 7,854 crore.
During the day, Vodafone Idea’s shares reached a 52-week high of Rs 12.88, before ending at Rs 12.56. This is up 26.7% on the BSE.
The Board of Directors of Vodafone Idea Ltd (VIL) will meet on Friday to discuss and evaluate proposals for raising funds in one or more tranches through public issue, issue of equity shares or securities among other options.
The Supreme Court said that the telecom companies would have to pay 10% of their dues by March 2021 and would then get 10 years to pay off their dues in yearly instalments.
The board will consider raising funds in one or more tranches by way of a public issue, preferential allotment, private placement, including a qualified institutions placement or through any other permissible mode or combination thereof, by way of issue of equity shares or by issue of any instruments or securities, including securities convertible into equity shares.
Noting that a shorter repayment timeline is a big setback for Vodafone Idea, Sonam Chandwani, Managing Partner at KS Legal & Associates, had said that with staggering liquidity stress, a review petition in near future is foreseeable.
"A 10-year window will put pressure on cash flows and Vodafone may sell a huge chunk of equity shares to a potentially strong investor, as the company has a bleak future with a very high investment requirement," she said.
Vodafone Idea may also look to increasing its Average Revenue Per User (ARPU) to ease stress.
