Vodafone Idea (Vi) has put forth a proposal to borrow ₹23,000 crore in term loans from banks and has also requested an additional ₹10,000 crore in bank guarantees, said a report by Economic Times (ET). This move is part of Vi's efforts to raise capital for enhancing its telecom infrastructure and competing with larger rivals such as Reliance Jio and Airtel.
The requested funds are a portion of the ₹55,000 crore in capital expenditures that Vi aims to raise to expand 4G coverage and initiate greenfield 5G rollouts in strategic markets. If approved, this financial boost will help Vi strengthen its position in the competitive telecom market.
In its presentation to lenders, Vi said it needs the money to upgrade its mobile broadband network infrastructure in its 17 priority markets.
Citing people familiar with the matter, the ET report said that, Vi submitted the term loan proposal at a meeting of a State Bank of India (SBI)-led banking consortium a few days ago.
Further, the banks will now seek a techno-economic viability (TEV) report from a top consultancy firm to assess Vi’s credit-worthiness before taking a call on sanctioning the loan. A Techno-Economic Viability (TEV) study is a comprehensive examination of a project's financial viability and technical components. It's a risk mitigation exercise that banks and financial institutions often perform before making lending decisions.
This move is part of Vi's efforts to raise capital for enhancing its telecom infrastructure and competing with larger rivals such as Reliance Jio and Airtel. The requested funds are a portion of the ₹55,000 crore in capital expenditures that Vi aims to raise to expand 4G coverage and initiate greenfield 5G rollouts in strategic markets. If approved, this financial boost will help Vi strengthen its position in the competitive telecom market.
The impact of Vi's proposed borrowing on its financial health depends on several factors. Borrowing ₹23,000 crore in term loans will result in interest payments. Vi will need to manage these costs effectively to avoid straining its financials.
Increasing debt affects Vi's debt-to-equity ratio. If the company's equity base remains stable, higher debt could lead to a higher ratio, potentially affecting investor confidence. Vi must ensure it has sufficient liquidity to meet debt obligations. If cash flows are strained, servicing debt could become challenging. The borrowed funds are intended for infrastructure expansion. If Vi successfully enhances its network and services, it could boost revenue and improve financial health.
Vi faces intense competition from Jio and Airtel. The borrowed capital should be strategically deployed to gain a competitive edge. Vi's credit rating may be impacted. A downgrade could increase borrowing costs and affect investor perception.
In summary, Vi's financial health will depend on prudent management of borrowed funds, efficient utilization, and successful execution of expansion plans
Advertisements