Vodafone Idea ( Vi () dialed a number of lenders State Bank of India , Punjab National Bank , HDFC Bank IDFC First, among other things — to line up Lenders Amounting to Rs. 7,000 crore. The majority of the loans will be used for clearing a portion its dues. Indus Towers Three people who were aware of the situation said that Vi approached them for a loan. ET has been told by a bank senior that Vi had approached them about a loan. But, we have not yet committed to anything.
Lenders demanded clarity about the potential government shareholding and plans for promoters to infuse to support investor trust , and business scale up.
A representative from another lender stated that Vi asked them to factor in Rs 15,000 Crore bank guarantees, and to grant new loans.
Monthly Indus Dues at Rs 250-300 crore In a revival package for the sector, the government refunded the bank guarantees. Vi, which was promoted by India’s Aditya Birla Group(ABG) and the UK’s Vodafone Plc, needs cash fast as Indus’ dues have reached around Rs 7,500 Crore. It has made a commitment that the tower company will pay 100 percent of its current debts beginning in January. The plan also includes a seven-month repayment of any outstanding dues as of December 31, 2022. A person familiar with the matter said that Vodafone Idea’s monthly payments to the tower firm are between Rs 250 and 300 crore. Indus warned Vi previously that Vi would lose access to the tower sites if its payments weren’t cleared. The tower company was then offered the deferred payments proposal by the telco.
ET had not received any responses to its queries regarding Vi and ABG as of press time. Indus and Vodafone UK declined comment. SBI , PMNB HDFC Bank, and IDFC First were not available for comment.
One of the officials mentioned earlier stated that banks cannot refuse loans to companies with negative net worth and that no guarantees were made that the loans would be repaid. Vi had a negative net value of Rs 75,830.8 million as of September 23rd, FY23. SBI had previously received a request from the company for a Rs 16,000-crore loan. However, that request has yet to be approved. “Vi could face harsh action from Indus in case it fails to meet the current payment timelines, beginning from January…if it doesn’t, things could escalate. Indus’ next board meetings later this month may discuss more aggressive measures to recover its dues.” A person familiar with the tower company’s thinking said.
Indus’ financial situation is already difficult due to Vodafone Idea not paying its dues. It reported a 44% decrease in its September quarter net profits to Rs 872 crore. This is mainly due to a provision for Rs 1,770.9 crore towards doubtful loans, which are related to Vi company’s receivables. Indus’ trade receivables grew 4% sequentially to Rs 6,499 million in September quarter, largely due the delayed payments. Kotak Institutional Equities reported that Vi’s financial difficulties have resulted in Indus’ receivables ballooning. ET was able to see the note. Indus’ receivables will continue increasing due to Vi’s inability pay on time. Indus’ receivables may need to be provisioned for (Rs. 3,000 crore bad-debt provisions in H1 FY23), and eventually written off.
The brokerage stated that Vi, a cash-strapped telco, accounts for more than 40% of Indus revenue and therefore, up to 10% of the annual overall revenue of the tower company could be at risk from Vi’s shortfall.
Vi still owes Indus Rs 7,500 cr despite Vi’s recent equity infusion of over Rs 4,900 crore by Vi’s promoters. Vi’s fundraising will be difficult given Vi’s market share fall and it will continue taking a toll upon Indus,” Kotak cautioned. Vodafone Idea was responsible for more than Rs. 3,000 crore of the funds.
Vi also urgently needs funds to pay off its huge debts to Ericsson and Nokia. It also requires cash to rollout 5G services, increase its 4G coverage and stop customer losses to financially more powerful rivals Airtel or Jio.
Vi was burdened with a net deficit of around Rs 2.25 lakh crore for the second quarter. It ended the quarter with a modest balance of Rs. 190 crore. The company’s debt repayment of Rs 9,600 crore by September 2023, could further limit its ability to make capex. It is urgently in need of a significant capital raise.
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