SBI agrees to sanction its share of the loan; disbursement may depend on Vi securing funding from private banks
New Delhi: Vodafone Idea (Vi), India’s third-largest telecom operator, is reportedly close to securing financial support for its planned capital expenditure, with the State Bank of India (SBI) agreeing to sanction its share of the proposed loan.
According to people familiar with the development, the latest progress came after Vodafone Idea agreed to provide guarantees through its promoter companies. The absence of such guarantees had reportedly been one of the key reasons behind the earlier deadlock between the telecom company and lenders.
SBI loan disbursement linked to private-bank funding
However, Vodafone Idea may still have to clear another hurdle before receiving the funds. SBI is unlikely to disburse its portion of the loan until the telecom operator secures the remaining financing from private-sector banks, according to sources.
A senior banker familiar with the matter said the discussions have reached a positive stage and expressed hope that the process would move forward soon.
The guarantees will reportedly be provided by Vodafone Idea’s promoter companies rather than the larger listed companies within the group. The listed group companies are understood to be unwilling to provide such guarantees.
Guarantees provide additional comfort to SBI
The promoter guarantees may not completely cover SBI’s total exposure, the exact amount of which has not been disclosed. However, they are expected to provide an additional layer of security for the lender while supporting the proposed financing arrangement.
Vodafone Idea has reportedly sought the release of these guarantees if the company performs satisfactorily over a period of four years. SBI is understood to have agreed to this condition.
Funding crucial for Vodafone Idea’s expansion plans
The proposed financing is important for Vodafone Idea as the telecom operator continues efforts to strengthen its network and invest in capital expenditure. The company has been working to improve its competitive position in India’s highly competitive telecom market, where it faces strong competition from Reliance Jio and Bharti Airtel.
If the remaining funding from private-sector banks is secured, the loan arrangement could provide Vodafone Idea with greater financial flexibility to accelerate its network expansion and capital expenditure plans.
The development is therefore being closely watched by the telecom and banking sectors, as successful completion of the financing could provide a much-needed boost to Vodafone Idea’s ongoing revival efforts.
