India’s largest rights issue raises US$3.5 billion

rights issue

Vodafone Idea raised 250 billion (US$3.5 billion) in the largest rights issue in the country to date and the first capital raising by Vodafone Idea after the merger of Vodafone India and Idea Cellular in August 2018.

“Given the recent merger, the disclosures in the offer document were extensive and at par with an initial public offering (IPO),” said S&R Associates partner Jabarati Chandra, who advised Vodafone.

Vodafone offered around 20 billion equity shares at a price of 12.50 per equity share. The issue was covered nearly 1.08 times. Vodafone Idea had 32% of the revenue market share as of December 2018 and 387 million subscribers.

Chandra said this was the first “fast-track” rights issue as it did not require markets regulator Securities and Exchange Board of India (SEBI) to review the draft offer document as part of the recently introduced SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018.

“Also, with the market uncertainty given that the elections were around the corner and Bharti Airtel, another major telecom company, announcing a significant rights issue, it was a challenging transaction,” Chandra told Asia Business Law Journal.

Chandra was supported on the transaction by partner Sandip Bhagat and associates Brajendu Bhaskar, Pratichi Mishra, Utkarsh Mishra, Rohini Sud and Sonal Bhargava. The firm was involved in all aspects of the transaction.

“The competitive landscape [of the Indian telecom sector] set the tone for the deal in terms of tight timelines and challenging the deal team to generate innovative and practical solutions for various issues,” said Yash Ashar, partner at Cyril Amarchand Mangaldas (CAM). The firm acted as the Indian legal counsel to book running lead managers Kotak Mahindra Capital, DSP Merrill Lynch, Morgan Stanley India, HDFC Bank and SBI Capital Markets.

Ashar led the deal’s transaction team and was supported by partner Abhinav Kumar, principal associate S Vivek, consultant Tania Chourasia and associate Siddhant Sattur, Saee Athalye and Priyattama Bhanj.

Ashar said the headwinds in the sector and uncertainty of subscription commitment prompted the promoters “to subscribe to the rights issue over and above their entitlement”. The promoter shareholders, Vodafone Group and Aditya Birla Group, picked up to 110 billion and 72.5 billion worth of shared equity respectively in the issue.

The Singapore and New York offices of Sidley Austin acted as the special US counsel to the lead managers. The team comprised partners Manoj Bhargava, Ankit Kashyap, Nicholas RBrown and Brian M Kaplowitz; counsel Carla G Teodoro and associates Varun Jetly and Christian D Molander-Barraza.

“Our role in the offering was to advise the lead managers from US federal securities law perspective with respect to disclosure, compliance with US federal securities laws, risk management, structuring and execution of the offering, among other matters,” Kashyap told Asia Business Law Journal.