Vodafone Idea: Armed with Rs 60,000 crore war chest, telco to focus on revenue per user

Vodafone Idea (VIL), which is building its war chest with nearly Rs 60,000 crore — a mix of equity infusion, monetisation of Indus Towers’ stake, cash balance and cumulative EBITDA – will be able to keep the company adequately funded for two years, but the focus on Arpu improvement will remain.

In a recent analyst meet, VIL said it expects to achieve cumulative EBITDA (earnings before interest, tax, depreciation and amortisation) of `20,000 crore in the next two years. However, this, coupled with equity infusion of `25,000 crore, realisation of around `5,000 crore from monetisation of Indus Towers’ stake and cash balance of `13,000 crore, will keep the merged company adequately funded only for the near term, while the high leverage will remain a concern, according to analysts.

“Despite the huge fund raise and the estimated EBITDA increase to `12,600 crore by FY21 (from `4,550 crore currently – 3QFY19 annualized run-rate), Vodafone Idea may have only eight quarters of funding, with the net debt-to-EBITDA ratio likely to remain at a steep 8.4x,” analysts at Motilal Oswal observed in a recent report.