Financial recovery of debt-ridden telecom company Vodafone Idea (Vi) doesn’t seem easy unless there’s a fresh equity infusion by its promoters — UK’s Vodafone Plc and India’s Aditya Birla Group — by January-February. Without this, it is tough to move ahead with the conversion of Vi’s Rs 16,130-crore accrued interest on deferred adjusted gross revenue (AGR)-related dues into equity.
“If a fresh capital infusion from Vi’s promoters does not come by January-February, it will become difficult for the telco to survive. The (equity) conversion can happen if the company shares a clear investment plan, including promoter fund infusion,” a senior government official told Economic Times.
There are growing concerns about the cash-strapped telco as the government has had no sign of fresh promoter-level equity infusion into Vi. Moreover, the telco would find it even more difficult to induce external investors or raise debt if the conversion of AGR-related dues does not take place.
Vi promoters had assured the government that they would invest around Rs 10,000 crore, shortly before the Centre decided a revival package for the telecom sector in September 2021, according to officials. The revival package offered telcos an option to defer their AGR-related dues by four years and another choice to get the accrued interest on the deferred dues converted to government equity. Vi had opted for the latter in January.
The telco has since then got a little over Rs 4,900 crore from promoters, a bulk of which it used to clear some dues to tower company Indus Towers.
Now, the government wants the cash-strapped company to infuse more capital in a show of sign about the telco’s business prospects which will lead to the equity conversion and fundraising via debt and equity. The Vodafone Group, on the other hand, had earlier stated that it won’t be injecting any fresh capital into its India joint venture.
Without more capital infusion from promoters, Vi won’t have any cash to grow its operations or meet its sizeable vendor dues and could be headed towards bankruptcy; in such a situation, a potential 33 per cent government stake in Vi won’t have any value, which could be a possible reason behind the delay at the government’s end to do the conversion, opined Rohan Dhamija, head (India & Middle East) at Analysys Mason.
Vi’s net debt in the second quarter was around Rs 2.2 lakh-crore. It had paid Rs 2,700-crore short-term loan to SBI in September to boost the banks’ confidence.
Meanwhile, investment bank Goldman Sachs is of the view that Vi’s cash shortfall can widen to Rs 6,400 crore by September 2023. “Without any capital raise, Vi’s ARPU will have to rise by Rs 35 for the company to meet its immediate repayment needs by Sep ‘23 (including capex, debt and interest expenses),” Goldman Sachs said.
