Vodafone Idea Set To Receive $3.5 Billion Funding From SBI-Led Group

Vodafone Idea is set to receive about $3.5 billion in debt financing from a group of lenders led by the State Bank of India, according to people familiar with the matter.

Union Bank of India and the National Bank for Financing Infrastructure and Development are also part of the lending group, the people said. The financing could give Vodafone Idea additional room to invest in its business as it tries to strengthen its position in India's highly competitive telecom market.

Funds Likely To Go Towards Network Expansion

A part of the proposed funding is expected to be used to improve Vodafone Idea's network and expand its ability to compete with Bharti Airtel and Reliance Jio.

The telecom operator has been looking to raise fresh debt for some time as it works to improve its financial position. CNBC-TV18 had reported in May that Vodafone Idea was in discussions with lenders, with SBI likely to lead the proposed consortium.

The company reported a net loss of ₹3,750 crore for the quarter ended June, which was lower than market expectations.

Birla To Remain Chairman During Loan Tenure

The proposed financing comes with certain conditions, according to the people familiar with the discussions.

One of them requires Kumar Mangalam Birla to continue as chairman of Vodafone Idea for the duration of the loan, which is expected to run for nearly 10 years. The funding arrangement is also expected to include repayment guarantees in case of a default.

Vodafone Idea and the banks had not immediately commented on the development.

Government Support Has Improved Vodafone Idea's Position

The company has received significant support from the government in recent years, helping it manage some of its large outstanding liabilities.

Earlier this year, the government capped Vodafone Idea's past spectrum payment obligations. The move gave the telecom operator some breathing room and was expected to improve its ability to attract fresh investment.

The government had also converted around ₹37,000 crore of Vodafone Idea's outstanding dues into equity last year. Following the conversion, the government's stake in the company increased to 48.99% from 22.6%.

Vodafone Idea shares have risen by nearly 28% so far this year, taking the company's market capitalisation to around ₹1.6 lakh crore.

The proposed $3.5 billion financing, if completed, would provide another important source of funding as Vodafone Idea looks to invest in its network and rebuild its business.

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