India's corporate circle was in for a surprise after billionaire banker Uday Kotak took an indirect dig at Vodafone Idea Ltd. Without naming the telecom operator or its head honcho, Kumaramangalam Birla, Kotak slyly remarked on VI's latest salvo of raising Rs 2,458 crore by issuing shares to pay off part of its outstanding dues.
Uday Kotak, in a post on social media platform X (formerly Twitter), said that issuing equity to creditors is one way of repaying debt when a company is facing financial difficulty. If the stock is well-traded, the creditor can sell it in the market and get paid by investors.
Financial markets create money out of thin air? A model for companies in financial difficulty: issue equity to creditors to repay their debt. If the stock is well traded, the creditor can sell in the market and get paid by investors. What is that story about Peter and Paul?
June 14, 2024This is not the first time Vodafone Idea has indulged in the shares-for-debt strategy. On May 17, the company announced that it would convert its government debts payable in fiscals 2026 and 2027 to equity, further diluting the stake of its shareholders.
The cash-strapped telecom company has raised Rs 24,000 crore of equity, which includes the conversion of 1,440 OCDs in March. It is in active discussions with lenders to raise debt funding of Rs 25,000 crore, it said.
The debt-ridden telecom giant will issue 166 crore shares, with a face value of Rs 10 each, on a preferential basis in one or more tranches to Nokia Solutions Ltd. and Ericsson India Ltd., an exchange filing said on June 13.
Notably, both Nokia Solutions and Ericsson India are Vodafone Idea's long-term network equipment suppliers.
As per data as of March 31, 2024, the company's payment obligations to the government stood at Rs 2,03,430 crore, as of March 31, 2024, including deferred spectrum payment obligations of Rs 1,33,110 crore and adjusted gross revenue liability of Rs 70,320 crore.
Debt from banks and financial institutions decreased by 64% to Rs 4,040 crore from the fourth quarter of the previous fiscal. Optionally convertible debts were reported at Rs 160 crore.
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