Vodafone raises $1.8 billion from Indus stake sale

The telco announced it sold 484.7 million shares, to be precise, equating to 18% of its 21.5% stake. Vodafone said, however, that its holding has been reduced to 3.1%, which means something isn't quite adding up here – perhaps some enthusiastic rounding down is to blame.

The total raised weighs in at INR153 billion ($1.82 billion), which puts the value of Voda's entire stake at approximately $2.12 billion.

That's pretty close to the $2.3 billion figure that was doing the rounds earlier this week, when unnamed sources told Reuters that Voda was planning to sell out of the Indian tower operator.

According to a report by Mint, SBI Mutual Fund and Bharti Airtel were among the biggest buyers. The former acquired more than 35 million shares, paying some INR11.2 billion ($133.6 million). Bharti Airtel – already Indus Towers' biggest single shareholder – increased its stake to 49% from 48%, paying the princely sum of INR8.6 billion for 26.95 million shares.

Vodafone said the proceeds will be used to pay off outstanding bank borrowings of $1.93 billion secured against its Indian assets.

That means Voda doesn't plan on using the money to pay off the estimated $1.2 billion it reportedly still owes to Indus.

It also won't do anything to alleviate the debt burden at its Indian joint venture, Vodafone Idea (Vi), although it would have been a fairly small drop in the ocean of debt that Vi is currently swimming in.

At the end of the March quarter, long and short-term bank borrowings and deferred payment obligations weighed in at a combined INR2.08 trillion ($24.8 billion).

What's more, during the quarterly earnings call, Vi CEO Akshaya Moondra said the telco was in talks with banks over a debt raise totalling INR250 billion ($3 billion), plus bank guarantees totalling INR100 billion ($1.2 billion).

On the one hand, banks being prepared to take on the risk of lending to Vi is a sign that the ailing telco is on financially firmer ground, but on the other hand, that debt will have to be serviced at some point, and until Vi turns a profit, servicing it will burn through cash on hand.

Vi and profits don't generally appear in the same sentence these days.

In the three months to March, its loss widened year-on-year to INR76.8 billion ($918.5 million) from INR64.1 billion, due to higher interest and financing costs. Taking on yet more debt is unlikely to bring those costs down any time soon.