Oaktree, Varde offer $2 bn funding to Vodafone Idea
Funding is critical as Vodafone hit by losses
A consortium backed by Oaktree Capital Management has offered to provide at least $2 billion of funding to Vodafone Group Plc's listed Indian arm, people with knowledge of the matter said. Oaktree teamed up with several other firms including Varde Partners for the potential deal with Vodafone Idea Ltd., according to the people. The investor group made a proposal to provide around $2 billion to $2.5 billion of capital to Vodafone Idea, the people said, asking not to be identified because the information is private. Vodafone Idea said in September it plans to raise as much as 250 billion rupees ($3.4 billion) selling shares and debt to shore up its finances as competition heats up in the Indian wireless industry. It wasn't immediately clear how a potential deal with the Oaktree-backed consortium would be structured.
The Indian carrier has also been speaking to other potential investors, and there's no certainty the negotiations will lead to an agreement, the people said. Representatives for Oaktree, Varde and Vodafone Idea declined to comment. Shares of Vodafone Idea rose as much as 4.4% Thursday in Mumbai. The stock has fallen more than 25% since Sept. 3 when it said its ability to continue as a business relied on successful negotiations with lenders and sufficient cash flow to settle or refinance liabilities coming due.
A fund infusion is critical for the telecom carrier formed by the merger of Vodafone Group's local unit with billionaire and chairman Kumar Mangalam Birla's Idea Cellular Ltd. Vodafone Idea reported its ninth straight quarterly loss in the three months through September and has not reported an annual profit since the merger was announced in 2017. The 2016 debut of billionaire Mukesh Ambani's Reliance Jio Infocomm Ltd. with its free calls and cheap data kick-started a massive consolidation that reduced the number of private wireless companies to three from about a dozen.
Vodafone Idea is the weakest financially among the remaining Indian wireless carriers, with $15.48 billion of net debt. It was impacted by an India court order last year to pay billions of dollars in back fees to the government, and Birla warned in December 2019 that the company was headed for insolvency in the absence of relief on the dues. However, in September, India's top court allowed telecom carriers to stagger back fees payment over 10 years.
Global heavyweights such as Oaktree and Varde are betting on profits from the rising number of capital-starved Indian businesses struggling to stay afloat, Bloomberg News reported on Wednesday. Research firm Venture Intelligence calculates that funds have already pumped $1.5 billion into distressed assets in India this year, 55% more than through all of 2019. (Bloomberg)