The government has set the ball rolling for providing some relief to Vodafone Idea after the Supreme Court dismissed its curative plea on re-computation of the adjusted gross revenue dues.
Official sources said as part of the relief measures, the company may be exempted from furnishing a financial bank guarantee of about Rs 25,000 crore for spectrum purchased before 2022 auctions. The company was required to submit this in lieu of spectrum payment a year before the moratorium on AGR and spectrum dues expires in September 2025.
Meanwhile, Vodafone Idea on Monday said in an investor call that it has initiated a “fresh dialogue” with the government on the likely remedies on the AGR dues matter. Further, it expects to conclude its much awaited debt funding of Rs 25,000 crore, in seven to eight weeks.
Stocks To Watch: Coal India, ONGC, Reliance Industries, OIL, Vedanta, Power Grid Corp
Govt envisages Rs 9.15 lakh crore investments in power transmission by 2032
Vodafone Idea debt reduction to take time, says CEO Akshaya Moondra
Weather today: Rainfall expected in parts of Delhi, Kolkata, Mumbai today – Check full forecast
On the bank guarantee front, government sources said that inter-ministerial discussions have favoured providing relief to the company. “The company is trying to raise funds for investment to improve customer services. The idea is to make the company viable,” an official said.
Vodafone Idea had sought relief from furnishing the bank guarantee based on the spectrum auction rules of 2022 and 2024 in which such a requirement was done away with.
“It’s a very clear understanding with them (the government) that we are not in a position to provide bank guarantee given our current negotiation with the banks. The government itself has said the industry has matured and as a result maybe bank guarantee should not be required,” Ravinder Takkar, non-executive chairman of Vodafone Idea said during an investor call on Monday, adding, “We have very positive feedback from the government”.
Akshaya Moondra, chief executive officer, Vodafone Idea added that while the outcome of the curative petition is disappointing, it does not have any impact on the long-term business plan and existing liabilities of the company.
“While a positive outcome would have no doubt eased the liability and enabled faster deleveraging, we would like to reassure you that the long-term business plan and revival strategy remain unaffected,” Moondra said.
Takkar said that the government has asked it to provide a comprehensive plan and mechanism by which the AGR issue can be addressed.
When asked about the government’s stand on the matter, communications minister, Jyotiraditya Scindia said, “At this point of time, whatever the Supreme Court has ordained, according to that the process has to be executed. We are still going through the process of examining that and see what the repercussion of that is going to be”.
Analysts said the likely remedy could be further extension of the moratorium period and conversion by the government of some part of the statutory dues into equity.
Once the moratorium on AGR and spectrum dues ends in September 2025, Vodafone Idea will need to pay Rs 29,100 crore by the end of March 2026, and Rs 43,000 crore annually from FY27 till FY31. If at all the government goes ahead and converts the dues, it would be for Rs 17,000 crore worth of dues, according to the company’s estimates.
The revival of the company is also in the interest of the government, which holds a 23.15% stake and would like to exit at an appropriate time.
With regard to the much awaited debt funding of Rs 25,000 crore, Moondra said the telecom operator expects to conclude that in seven to eight weeks. The company plans to raise Rs 25,000 crore through debt financing and an additional non-fund-based facilities of up to Rs 10,000 crore.
“A third-party engaged by the lead banker – State Bank of India (SBI) has recently concluded the techno economic evaluation. The report has been submitted to all the banks and financial institutions, which will now allow them to progress with their internal evaluation and approval processes,” Moondra said.
Besides the debt-funding, the company is aiming to clear the government dues with its cash flows. In a bid to improve the same, the company expects another tariff hike in the next 15 months of a similar stature of the July tariff hike of 10-25%.
When asked when the company would be able to restrict its user churn, Moondra said the subscriber metrics should start improving by the end of this fiscal with the company’s plan to expand its network.
At the end of the April-June quarter, Vodafone Idea’s gross debt (excluding lease liabilities and including interest accrued but not due) was at Rs 2.09 lakh crore. The gross debt comprises deferred spectrum payment obligations of Rs 1.39 lakh crore, AGR liabilities of Rs 70,320 crore that are due to the government, debt from banks and financial institutions of Rs 4,650 crore and optionally convertible debentures amounting to Rs 160 crore.
On Monday, Vodafone’s share price closed up 3.34% at Rs 10.83 on the BSE.
From: financialexpress
Financial News
