Vodafone Idea ( Vi () has called a variety of lenders State Bank of India , Punjab National Bank , HDFC Bank And IDFC First, and foremost — to line up Loans The total amount of the loans is estimated to be over Rs 7,000 crore. A portion of the dues will be paid off with the bulk of these loans. Indus Towers Three people familiar with the matter confirmed that they were aware of it. ET was told by a bank official that Vi approached them for a loan. However, they have not committed anything to them.
Lenders wanted to know more about the potential government shareholding in the telco and plans for promoters of infusing equity in order to boost investor confidence as well as business scale-up.
Another official said Vi had asked them to factorin Rs 15,000 crore bank guarantee and give new loans.
Monthly Dues To Indus at Rs 250-300 Cr Under a sector revival package, the government returned the bank guarantees last year. Vi was co-promoted in India by Aditya Birla Group and Vodafone Plc. Vi’s Indus dues have risen to approximately Rs 7,500 crore. It made a commitment to the tower firm to pay all its dues starting in January and to also pay its outstanding debts by December 31, 2022. This commitment was made over seven months. According to a source, the monthly dues of Vodafone Idea to the tower company amount to Rs 250-300 million. Indus had previously warned Vi that Vi would be denied access to its tower sites if it didn’t pay its dues. The tower company accepted the deferred payment offer that the telco had made.
ET did not receive any response to queries made to Vi or ABG at press time. Indus and Vodafone UK declined to comment. SBI and PNB were not reached.
According to one of the officials, the bank cannot lend money to companies with a low net worth. There was also no guarantee that the loans would be repaid. Vi had a net worth of Rs 75.830.8 crore at September’s end, FY23. SBI had previously approved a loan request of Rs 16,000 crore from Vi, but it has not been granted. According to a source familiar with the company’s thinking, Vi could be subject to stern action by Indus if it fails the payment deadlines. These dates are starting in January. If Vi doesn’t pay on time, the situation could escalate. Indus may discuss stronger measures to collect its debts at its next board meeting later in the month.
Indus Trouble
Due to Vodafone Idea’s unpaid debts, Indus is in a difficult financial position. The September quarter net profit fell 44% to Rs 872 Crore compared to the previous year. This was mainly due to a provision of Rs 1,770.9crore towards doubtful debt related to Vi’s receivables. Indus’ September quarter trade receivables increased 4% to Rs 6,499 Crore, largely because of the delayed payments. Kotak Institutional Equities stated that Vi’s financial problems have caused a ballooning Indus’ receivables in a note to ET. Indus’ receivables are expected to continue rising due to Vi’s inability make timely payments. This will need to be provisioned (Rs 3,000 crore bad credit provisions in H1 FY23) before being written off.
According to the brokerage, Vi’s cash shortage could put at risk 10% of Indus’ annual revenue.
Vi still owes Indus Rs 7,500 crore despite the equity infusion (over Rs 4900 crore) made by Vi’s promoters. Vi’s fundraise, given the market share decline, will be difficult and will continue to impact Indus,” Kotak warned. Vodafone Idea paid Indus more than Rs 3,000 crore from the funds.
Vi also needs urgent funds to pay its large vendor dues, such as Nokia or Ericsson. It needs funds to roll out 5G services and expand 4G coverage in order to stop customer losses to financially stronger competitors Airtel Jio.
Vi had a net debt of approximately Rs 2.2 lakh crore during the second quarter. However, Vi ended the quarter with a modest cash balance of Rs 193 crore. The upcoming repayment of Rs 9,600 crore in debt due September 2023 could limit Vi’s ability to finance capex. This highlights the urgent need for a substantial capital raise.