With Kumar Mangalam Birla on board, banks reconsider lending to Voda-Idea

The prospects are bright to charter new life at Vodafone Idea Limited.

With Kumar Mangalam Birla returning to the board as an additional non-independent non-executive director, senior sources said Business line The banks expressed their willingness to increase the credit limit of the troubled telecom company.

“Some of the discussions the company had with banks in the past week seem more promising than before,” said a senior official, who asked not to be named.

Bankers say that with Birla back on the board, they are open to increasing credit limits and/or pursuing new lending proposals. This ends nearly four years of reluctance by banks to lend to the telco.

Bankers alert

Interestingly, it is believed that Banks may have played a key role in ensuring Birla’s return to Voda-Idea’s board of directors.

“It got to a point where we (bankers) had to put our foot down to insist that promoters make an appearance in the game,” said a private bank chief executive. “Merely the government’s bailout or its intent to ensure telecom does not become a monopoly industry has not given us rest to increase our exposure to Voda-Idea.”

In addition, the banks demanded an injection of capital into the company by the promoters.

Another CEO said: “If Voda-Idea is looking to raise $1 billion, we’ve told them that if half of it has to be injected as debt, an equal share has to come from promoters or third-party investors as equity.” From a private bank that did not wish to be named.

In September 2021, Voda-Idea promoters committed to inject Rs 10,000 crore into the company. To date, Rs 4,900 crore capital has been injected from the proceeds of the sale of the Indus Towers stake.

Earlier, even if the telecom major promised a stock injection, banks weren’t willing to budge on the company’s request. Now, with Birla on board, that has changed. An email to Voda-Idea and the Aditya Birla Group remained unanswered at the time of publication.

On April 21, Voda-Idea announced Birla’s return to the telecom company’s board of directors. Birla was earlier the company’s chairman until he resigned from the position in August 2021.