Tata Teleservices (Maharashtra) Ltd (TTML) will raise up to Rs 35,000 crore through preferential shares to the promoters and non-convertible debentures.

Part of the proceeds may be used to clear the dues of the department of telecom (DoT) ahead of the merger of the consumer mobile business (CMB) of Tata Teleservices (TTSL) with Bharti Airtel.

In 2017, Tata Sons had announced the sale to the Sunil Mittal led entity on a debt-free, cash-free basis. Airtel was to acquire the Tatas’ mobile operations in 19 telecom circles (17 under TTSL and two under TTML). Recently, reports had indicated that Tata Sons could bankroll most of the dues.

At a board meeting held on Wednesday, the directors of TTML approved the raising of additional funds. In a communication to the stock exchanges, the company said it has received board approval to raise Rs 15,000 crore from its promoters, which include Tata Sons and its subsidiaries. Further, TTML will raise around Rs 20,000 crore through non-convertible debentures in one or more tranches.

“The board of directors of the company at its meeting held on May 29, 2019, has approved the raising of additional funds by issue of...redeemable preference shares to the promoter/s on preferential basis up to an aggregate amount of Rs 15,000 crores; and/or non-convertible debentures in one or more tranches up to an aggregate amount of Rs 20,000 crore,” the filing said.

While the company did not explain the rationale for the fund raising, it is learnt that the exercise is to clear the dues of the DoT as the transaction with Bharti Airtel was on a cash-free basis.

Last month, the DoT reportedly gave its approval to the merger, subject to the condition that Bharti Airtel furnished a bank guarantee of over Rs 7,000 crore. Earlier, the National Company Law Tribunal (NCLT) had sanctioned the merger.

The proposed merger is expected to improve Airtel’s spectrum pool with significant additional 178.5MHz spectrum in the 1800, 2100 and 850MHz bands, all widely used for 4G.

The merger was delayed as the DoT had sought clarifications on payments relating to spectrum-use charges and one-time spectrum fees.

TTML has reported a standalone profit after tax of Rs 579.55 crore in the quarter ended March 31, 2019, against a loss of Rs 681.5 crore a year ago.