The move to expand the global lender consortium aims to quickly meet Vi’s substantial funding needs and spread the risk across a larger pool of financiers, one respondent told ET.
The proposed funding model is likely to be a mix of convertible instruments that include bonds and warrants with an associated equity option that allow consortium members to convert some of the debt into company stocks, bankers and industry executives who said beyond knowledge of the matter.
The loss-making telecommunications joint venture jointly owned by UK Vodafone Group and India’s AV Birla Group is in dire need of funding to expand its 4G operations, arresting a steady loss of subscribers to rivals Reliance Jio and Bharti Airtel and its significant legal backlog of eliminating government fees.
The telecommunications company announced in September a donation plan of 25,000 rupees through a mixture of debt and equity. The $ 2 billion credit line being negotiated with the consortium is part of this plan.
The Vodafone group declined to comment, while GoldenTree, PIMCO, Oak Hill, Vi and the AV Birla group didn’t answer ET’s questions until Sunday at press time.
It is learned that the expanded consortium is at an advanced stage to complete due diligence and assess the tax implications for overseas lenders. It is well on its way to formalizing the final funding terms, which could lead to a binding term sheet by mid-mid-January. A binding contract is usually concluded as soon as all parties involved have reached an agreement on the details specified in the term sheet.
Last month, ET reported that Sixth Street, Twin Point Capital and Varde Partners were among the global investors in the consortium led by Oak Hill Advisors, which had already submitted a non-binding term sheet for Vi.Vi’s recent rebranding move to address the Business continuity plans to substantiate plans, but industry insiders close to the lenders said this needs to be backed by a much stronger 4G network on-site and products and services comparable to those of its competitors.
Vi leadership recently said the telecommunications company’s stated plans to raise up to Rs.25,000 had sparked a strong response from a variety of global funds and would likely close soon. Telecommunications still has more than 50,000 rupees in Adjusted Gross Revenue payable to the government over 10 annual installments through March 31, 2031.
Mumbai-based InCred Capital and its US investment banking partner PJT Partners are known to support Vi in its fundraising efforts.
Industry executives said the funds are likely to be paid out in tranches associated with the company, which meets strict, regular business goals of operating profit, subscriber growth, average revenue per user, and revenue market share.
Vi recently raised the prices of two postpaid family plans by around 50 rupees in some counties. Experts said the telecommunications company was testing the waters ahead of a broader price hike, which was badly needed to prop up finances and to underscore improving industry fundamentals to potential investors.
Brokerage ICICI Securities expects the next round of tariff increases to take place in March 2021 at the latest.