According to sources familiar with the matter, a group of creditors led by the State Bank of India has agreed to provide Vodafone Idea Ltd. with approximately $3.5 billion in debt financing. The purpose of this support is to help the mobile operator restore its business.
This consortium also includes other local creditors such as Union Bank of India Ltd. and National Bank for Financing Infrastructure and Development. These sources wished to remain anonymous as the information is not yet public.
Vodafone Idea, which ranks third in the country in terms of wireless operator users but is still operating at a loss, plans to use part of the received funds to improve its network and increase competitiveness against Bharti Airtel Ltd. and Reliance Jio Infocomm Ltd.
On the Frankfurt Stock Exchange, Vodafone Idea shares rose by 2% on Friday, while the Sensex index fell by 1%.
Financing Terms
The terms associated with this financing include a requirement for billionaire Kumar Mangalam Birla to remain chairman throughout the loan's term, which is nearly 10 years, as well as repayment guarantees in case of default.
Representatives from Vodafone Idea and the banks did not respond to requests for comment. Previously, CNBC-TV18 reported in May that the company, partially owned by the British Vodafone Group Plc, was negotiating with creditors, and that SBI was likely to lead the consortium.
Vodafone Idea reported a smaller-than-expected loss of 3,750 crore rupees ($394 million) for the first quarter ending in June.
Earlier this year, Indian authorities supported Vodafone Idea and gave it more chances to attract investors by limiting spectrum payments made previously. Furthermore, last year, the government converted about 37,000 crore rupees of outstanding debt into equity, increasing its stake from 22.6% to 48.99%.
These steps contributed to the growth of Vodafone Idea's shares, which reached a market capitalization of about 1.6 trillion rupees this year.