Vodafone readies for spectrum auction, board okays additional borrowing

Vodafone India, a wholly-owned subsidiary of the UK-based Vodafone Group Plc, has got the board's nod to borrow an additional amount of Rs 15,000 crore in 2014/15.

As on March 31, 2014, the total debt stands at Rs 50,000 crore.

Sources said the additional money is need for the upcoming spectrum auction. The government is likely to auction spectrum in 184 MHz and 104 MHz band.

In February, Vodafone had acquired 72MHz spectrum in an auction for Rs 19,644 crore.
 
Now that the much-talked-about IPO is not in the offing thanks to the tax dispute, Vodafone India plans to mobilise funds through commercial paper, certificate of deposits and bonds.

Vodafone India, however, refused to comment on the additional borrowing limit.

The Indian arm of the global major has already said that IPO will come once it settles its $2-billion tax dispute with the Indian government.

The UPA government had slapped a tax demand retrospectively for Vodafone's buy out of Hutchison Essar's 67 per cent for $11.2 billion. The acquisition took place way back in 2007 when Vodafone set its foot in India's growing telecom market.
 
Vodafone is in for a long haul in India with the backing of a strong promoter. The group is committed to support its close to a dozen subsidiaries in India. In fact, Vodafone is also game for another acquisition in India. Its name was doing the rounds recently for acquiring another telecom provider Tata-DoCoMo.
 
Market observers say any additional debt will result in a higher debt-equity ratio, but in case of Vodafone India, the impact will not be much as the parent company can bring equity capital as and when required. Being a 100 per cent subsidiary, there is no approval required from other partners to infuse capital.

Vodafone India is slowly building scale in India. It is already amongst the top three service providers. In fiscal 2014, Vodafone India clocked a revenue of Rs 42,125 crore, an increase of 13.5 per cent over the previous year.