2 reasons why Vodafone Idea shares are in focus today

Shares of Vodafone Idea Ltd will be in focus on Thursday morning after the telecom operator said a meeting of its board of directors is scheduled to be held on Monday, December 9, to consider raising of funds not exceeding Rs 2,000 crore. Besides, the parent Vodafone PLC said it is offloading its entire 3 per cent remaining stake, or 79.2 million shares, in Indus Towers -- held by Omega Telecom Holdings Private Limited (2.26 per cent) and Usha Martin Telematics (0.74 per cent), through an accelerated book build offering.

Vodafone PLC said the proceeds from the placing will be first used to repay Vodafone's outstanding borrowings of $101 million to Vodafone's existing lenders, secured against Vodafone's Indian assets. "Under the terms of the security arrangements entered into between Vodafone and Indus (the Security Arrangements), Indus has a security over the residual proceeds from the placing to guarantee obligations from Vodafone Idea Limited (Vi) to Indus under the Master Services Agreements (MSAs)," a statement read.

Vodafone said it intends to contribute the residual Indus Towers proceeds from the placing -- after repayment of Vodafone's outstanding borrowings, towards the issue of new equity shares by Vodafone Idea once the terms of such a capital raise have been evaluated and decided on by the board of directors of Vodafone Idea.

In the case of fundraising, Vodafone Idea said it proposed to raise Rs 2,000 crore via issuance of equity shares and/or convertible securities on a preferential basis to one or more entities belonging to Vodafone group promoters.

"The proceeds from the capital raise would be used by Vi to pay outstanding MSA dues to Indus. Following the repayment of Vodafone's outstanding borrowings, if any Indus Shares remain, such Indus shares and any proceeds which are not used by Vodafone to subscribe to new shares in VIL would be available to Indus to guarantee VIL's obligations under the MSAs," it said.

Indus Towers in a release said it has released the pledge on 3.003 per cent shares held by Vodafone promoters in the company for the relevant Vodafone promoters to execute the sale of such shares and utilise the proceeds, as per the terms of the security package provided by Vodafone promoters.

"With Vi’s large capex plans, we believe the pace of market share gains may slow down. However, RJio and Bharti are still likely to continue gaining market share at Vi’s expense, in our view. We continue to prefer Bharti and RIL in the telecom space," MOFSL said in a note.