Vodafone India planning to file DRHP for IPO by September

Mumbai: Vodafone India, the Indian unit of Vodafone Group Plc, is planning to file its draft initial public offering (IPO) documents by September, said two people aware of the development.

The IPO of the second largest telecom operator by number of subscribers in India is likely to raise Rs.15,000-18,000 crore.

“The kick-off meeting with the tier I banks Kotak, Bank of America and UBS happened a few weeks ago and work has started on full swing on the documentation part. They are looking to file the draft red herring prospectus (DRHP) by the month of September,” said the first person cited above, requesting anonymity as the person is not authorized to speak to the media.

The aim is to complete the listing within this fiscal and file the DRHP as early as possible, he said, adding that internally the company has been working on the process for some time now and are well placed to file the draft document by September.

On 30 April, Reuters reported that the British telecom major had hired Bank of America Merrill Lynch, Kotak Mahindra Capital Co. Ltd and UBS as joint global coordinators of its Indian unit’s IPO. Deutsche Bank, HSBC and ICICI Securities were appointed as joint book-runners, the report said.

A spokesperson for Vodafone Group Plc declined to comment on the development.

“We have previously said that we have started preparations for a potential IPO, which includes private conversations with banks, but this is a lengthy process and no decision will be made until we are at the end of it,” the spokesperson said in an email response.

The public offer will be majorly a primary capital fund raise exercise, said the second person cited above, requesting anonymity.

“Major chunk of the IPO is to raise primary capital for the Indian unit, which will go towards reducing the debt on its balance sheet, on account of spectrum purchase, as well as towards capital expenditure,” said the second person. The parent company is likely to sell some part of its stake through a secondary share sale in the IPO, he added.

In October, the company announced that it will spend Rs.13,000 crore for capacity augmentation and new business initiatives. Since starting operations in India in 2007, Vodafone has already invested over Rs.1.1 trillion in India, the company said.

The telecom operator has 194 million customers in India, according to the company’s website. Vodafone India reported a revenue of Rs.42,352 crore in 2014-15, up 12.6% over the previous year. Vodafone may sell about 10% of the India business through the share sale that would value the operations at $20 billion, a Bloomberg report in April said.

Bharti Airtel Ltd, Vodafone’s rival and India’s largest telco by number of subscribers, has a market capitalization of Rs.1.41 trillion (approximately $21.3 billion). Idea Cellular Ltd has a market cap of Rs.41,173 crore (approximately $6.2 billion).

The movement towards an IPO comes even as Vodafone wages a protracted battle with Indian tax authorities. The tax department and Vodafone have been locked in a dispute since 2007 over the telecom company’s $11 billion acquisition of Hutchison Essar Ltd, now known as Vodafone India Ltd. The tax demand, which was initially around Rs.8,000 crore, has now more than doubled to Rs.20,000 crore after adding interest and penalty.

Though the Supreme Court ruled in favour of Vodafone in the tax case, the government, in 2012, introduced retrospective amendments to tax laws, bringing such transactions under the tax net. This prompted Vodafone to launch international arbitration proceedings.

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