Vodafone Idea Approaches SBI for loan, Bank Demands Turnaround Plan

Vodafone Idea Approaches SBI for loan, Bank Demands Turnaround Plan

Vodafone’s India unit is in discussion with the country’s largest lender about fresh loans, in a deal that could pave the way for other banks to offer credit and boost survival chances of the cash-trapped wireless operator.

SBI has asked Vodafone Idea Ltd., a joint venture between Vodafone and billionaire Kumar Mangalam Birla’s conglomerate, to first outline a turnaround strategy, according to sources.

The government-owned lender has asked Vodafone Idea to present a detailed plan on their financial viability including equity infusion from the largest shareholders, cash conservation plans, tariff outlook and a road map to return to profits, according to the people familiar.

The mobile-phone operator is preparing this information for the lender, the people said. Discussions are still underway and there’s no assurance the company will receive this funding.

The bank loan, if it materializes, will be a lifeline for the company which hasn’t reported an annual profit since Mukesh Ambani’s Reliance Jio Infocomm. unleashed a tariff war in 2016 and has been losing subscribers to bigger rivals in the past year. Banks have become more amenable toward the unprofitable wireless operator after India announced a slew of policy relief measures in September which helped Vodafone Idea avert an insolvency threat.

India’s third-largest wireless operator survived a potential bankruptcy after the government allowed more time to mobile phone companies to pay their dues. This will extinguish some of the bank guarantees Vodafone Idea gave to the government, giving the lenders more elbow room to extend credit, one of the persons said.

Vodafone Idea’s total debt was 1.9 trillion rupees ($26 billion) as of June-end, including 1.68 trillion rupees owed to the government and the remaining 234 billion rupees to lenders, according to a Sept. 15 note from brokerage JM Financial.

State Bank of India has the highest exposure to Vodafone Idea among other lenders, the people familiar said.