Vodafone Idea Raises ₹3,300 Crore via NCDs After Supreme Court Relief

Vodafone Idea, the third-largest telecom company in India in terms of customer base, has successfully raised ₹3,300 crore through secured, unlisted, and unrated non-convertible debentures (NCDs). This fundraising comes less than two months after the Supreme Court provided the financially struggling company with some reprieve.

The company, which faced potential bankruptcy due to approximately ₹2 trillion in dues to the government, is undergoing a review of these dues following a Supreme Court order issued in late October.

The fundraising was conducted through Vodafone Idea Telecom Infrastructure Ltd (VITIL), a subsidiary of Vodafone Idea. The company stated that the proceeds will be used by VITIL to repay its obligations to Vodafone Idea. This move will enable the telecom operator to increase its capital expenditure and support overall business growth.

According to Vodafone Idea, the NCD issuance saw significant interest from large non-banking financial companies, foreign portfolio investors, and alternative investment funds, with demand exceeding the amount of NCDs offered.

CEO Abhijit Kishore stated that this capital infusion marks the beginning of a new capital expenditure cycle for the company. He added that this strengthens their momentum as they continue to expand their network and improve services for customers. Kishore also noted that discussions with banks regarding long-term debt raises to support capital expenditure are ongoing.

JM Financial Products Ltd served as the exclusive debt arranger for the fundraising.

Vivekanand Subbaraman, lead analyst for telecom and media at Ambit Capital, suggested that the NCDs issue indicates a credit upgrade for Vodafone Idea. He pointed out that the government's conversion of spectrum dues (worth ₹36,950 crore in April) into equity moved its debt from junk-rated to investment grade, creating favorable conditions for banks to lend to the company after the government addresses its dues.

While the government is currently reassessing Vodafone Idea's adjusted gross revenue (AGR) dues, the company's long-term survival depends on the extent of relief it receives and its ability to secure debt to finance network rollout and operations. AGR represents the income calculated from telecom operators’ total revenues, serving as the basis for regulatory fee payments.

As of the end of September, Vodafone Idea's AGR dues stood at ₹78,500 crore out of the total ₹2 trillion owed. The remainder primarily consists of payments owed for wireless spectrum purchased at auction.

Analysts have previously highlighted the substantial size of these dues, emphasizing that the company's future hinges on government waivers. Emkay Global Financial Services, in a report dated November 11, noted that restructuring spectrum and AGR dues is crucial for the company's long-term sustainability. The report stated that even without AGR dues, leverage remains high, necessitating government consideration of a relief plan, given the total debt of ₹1.96 trillion, including ₹0.76 trillion in AGR liabilities and ₹1.18 trillion in spectrum debt (as of March 2025).

Vodafone Idea currently has 196.7 million customers, significantly fewer than Reliance Jio (506 million) and Bharti Airtel (364 million).

Vodafone Idea had previously stated that it was in talks with lenders to secure debt financing to support capital expenditure plans of up to ₹55,000 crore. In August, the company announced it was exploring non-banking funding sources to maintain its capital expenditure cycle.

During a recent earnings call, CEO Kishore stated that the company expects to spend between ₹7,500 crore and ₹8,000 crore in capital expenditure during the current financial year. In the first half of the year, the company spent ₹4,200 crore to improve 4G network coverage and roll out 5G networks. Kishore added that the current spending, focused on both 4G and 5G coverage, will be funded through internal accruals and existing funds, without the need for external funding.

In the September quarter, Vodafone Idea reported a net loss of ₹5,524 crore, an improvement from the ₹7,176 crore loss reported in the same quarter last year. The company's revenue from operations increased by 2.4% year-on-year and 1.6% sequentially to ₹11,194.7 crore.

The company’s average revenue per user (ARPU) increased slightly to ₹167 in the latest quarter, compared to ₹165 in the previous quarter. For comparison, Reliance Jio’s ARPU was ₹211.4 and Airtel’s was ₹256 in the September quarter.