Vodafone Idea may offer more shares to vendors to clear dues

"The fundraise from the preferential issue to Nokia and Ericsson will be used to part-pay their dues but further dilution can't be ruled out. (Since) Vi's recent is earmarked for new capex, we wouldn't rule out further equity swaps and dilution to vendors in the future to clear operational dues," JP Morgan said in a note seen by ET.

Vi is saddled with around ₹20,000 crore of overall payables (including ₹13,731 crore trade payables) and proposes to use the ₹24,000 crore equity capital recently raised only for fresh capex to expand 4G coverage and roll out 5G networks. Trade payables, typically, reflect Vi's dues to vendors such as network gear suppliers and tower firms.

Before the proposed preferential share issue, Vi owed over ₹1,200 crore to Ericsson and around ₹3,000 crore to Nokia, people aware of the matter said. After the share issue, Nokia and Ericsson will hold 1.5% and 0.9%, respectively, in Vi.

At press time, queries to Vi, Nokia and Ericsson remained unanswered.

By contrast, analysts expect tower vendor Indus to face big challenges in recovering its backlog of old dues from Vi-estimated at around ₹10,000 crore (including interest). This is since Vi cannot issue shares to Indus against past dues. This is since rival telco Bharti Airtel holds nearly a 48% stake in Indus, and any potential equity issuance by Vi to Indus would result in the Sunil Mittal-led telco having an indirect ownership in Vi, which is not allowed under India's telecom laws.

"Unlike other vendors (read: Nokia/Ericsson), Vi will be unable to issue shares to Indus under India's telecom laws due to Airtel's ownership in the latter...," JP Morgan added.