Ailing telecom Vodafone Idea (Vi) is in discussion with bond holders to refinance Rs 6,000 crore worth of its debt. The company, which merged with Idea to form Vi, announced on August 16 that it was in discussion with bond holders to refinance debt that is due in the next six months.
The company, once the largest telecom player in India after the merger, has been operating in the red due to low tariffs and increasing competition.
The company is trying to refinance Rs 6,000 crore worth of non-convertible debentures that will be maturing from December, 2021. The telecom, jointly owned by Aditya Birla Group and Vodafone Group, UK, is also trying to raise fresh funding. It has been attempting to raise Rs 25,000 crore for almost a year now, as the promoters of the company have been unwilling to put in more money into the venture.
A major source of the burden on Vodafone Idea is the adjusted gross revenue (AGR) dues as calculated by the Department of Telecommunications (DoT). The total amount owed to the government, including the interest, stands at Rs 62,180 crore.
The company has filed a review petition in the Supreme Court claiming errors in DoT calculations.
The future for Vi, however, is fraught with challenges as the recent earnings report showed that the company was struggling to maintain cash flow and its market share.
“Vi’s June quarter cash Ebitda at Rs 1,380 crore shows fast deteriorating cash flow, while liabilities are rising … we see high risk and huge concern for Vi, and in the wake of growing uncertainties, we believe the existing operation is unlikely to meet upcoming pay-outs, and the risk of default cannot be ruled out as the much-anticipated tariff hike/s and capital infusion have been insufficient,” ICICI Securities said in a note.
Vi's default would mean that India's once vibrant telecom sector will be reduced to a duopoly and losses in the tune of thousands of crores through unrecoverable debt for the DoT and lenders.
(Edited by : Anshul)
First Published: Aug 17, 2021 3:37 PM IST
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