Vodafone Idea Bonds Resume Trading As Investors Return Post SC Relief


Vodafone Idea’s bonds have resumed trades for the first time in nearly a year, indicating revival of investor interest in the debt instruments of the telco that got a deadline breather on its obligations after the apex court set a staggered payments timeline on long-pending statutory dues running into billions of dollars.

The bonds are yielding 27 per cent, rates normally associated with junk bonds, but still lower than 42.9 per cent on October 16 last year. For about a year, these bonds did not find any takers in the secondary market.

Secondary market trades in these bonds resumed on September 9 this year. Since then, about eight such trades have taken place, show data compiled by JM Financial. About ₹140 crore of bonds were collectively traded at yields of up to 27 per cent.

Bond yields rise when the underlying price falls.

Local mutual funds and a Mumbai-based new generation private bank have reportedly sold those papers to high networth individuals, market sources said.

“Wealthy investors have started taking bets on Idea Vodafone bonds after the phone company obtained some relief from the Supreme Court, and the parent won an international tax arbitration case,” said managing director at JM Financial, Ajay Manglunia,. “Institutions are selling at a discount, which is now dropping with the prospect of a revival of the company. We expect more such trades in coming days as we are receiving more inquiries.”

The particular series of bonds were probably sold early 2017 and will mature on January 31, 2022.

The Supreme Court has granted mobile operators a period of 10 years to pay what’s called the AGR dues of about ₹50,400 crore.

Separately, about a week ago, the British telecom giant Vodafone Group plc, the parent company that joined hands with the Birla group to form Vodafone Idea, won an arbitration case against the Indian government over a demand for ₹22,100 crore in taxes.

The company is considering credit enhancements to provide additional comfort to global investors as part of its debt structuring options, as plain vanilla offerings may not attract interest in a company with debt of almost ₹1.7 lakh crore, ET reported on September 7.

The telco is working with Mumbai-based InCred Capital and its US investment banking partner PJT Partners along with BNP Paribas on a fundraising structure including common equity, equity-linked and hybrid debt instruments. Debt and bond issuances could form US$2 billion-US$2.5 billion of the US$3.4 billion (₹25,000 crore) that the company plans to raise. Vodafone Group does not intend to put any new equity into Vodafone Idea, it had said earlier.

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