Could telecom operator Vodafone Idea shut shop soon?

telecom

by 5paisa Research Team Last Updated: Jan 04, 2023 - 11:30 am 41k Views

Trouble for the telecom operator Vodafone India seems to have mounted as its promoters, the UK's Vodafone Group and India's Aditya Birla Group, are not willing to infuse more capital into the company.

This is making it unviable for the government to convert the accrued interest on deferred adjusted gross revenue (AGR) dues into equity, a report in The Economic Times (ET) said. 

Are the promoters unwilling to infuse any money?

The promoters are willing to infuse Rs 2,000-3,000 crore but it is too less to revive the company. 

"Vodafone Idea needs around Rs 40,000-45,000 crore for sustaining itself. Assuming that banks fund around half of it, the promoters have to put the rest. In the absence of promoter funding, it will be difficult for the company to get external investors...Without promoter infusion, even banks are unlikely to support," a senior official told ET.

Are any foreign investors likely to support the company?

The company is also unlikely to raise money from foreign investors as they want the government to take the stake in the telco first.

So, how do the company’s books look like?

At the end of September 2022, according to ET, the company had a cash balance of Rs 190 crore, while its net debt stood at Rs 2.2 trillion. Its dues to banks and other lenders were at Rs 15,080 crore. The company also needs urgent funds to clear its dues to large companies like Indus Towers, ATC, Nokia and Ericsson.

What do analysts have to say about the situation?

According to analysts, the interest on AGR-related dues stood at Rs 16,130 crore. If it is converted to equity, the government may get a hold of a 33 per cent stake in Vodafone Idea.

What was the original rescue plan like?

The promoters had originally told the government that they would invest Rs 10,000 crore in the firm but since January 2022, the company has received only Rs 4,900 crore from the promoters. Most of it has been used to clear the dues of Indus Towers.

So, is the company looking for more loans to stay afloat?

In December, the company had approached the State Bank of India for a loan of Rs 15,000-16,000 crore. However, the bank sought clarity on the government's potential stakeholding in Vi's business. The loan has not fructified yet.

How do you rate this blog?

or

Start Investing in 5 mins*

Rs. 20 Flat Per Order | 0% Brokerage

About the Author

Our research team is composed of some highly qualified research professionals, their expertise range across sectors.

Open Free Demat Account

Resend OTP
Please Enter OTP
Account belongs to

By proceeding, you agree to the T&C.

Latest Blogs
Bearer Cheque

Introduction A bearer cheque is an efficient and adaptable financial tool. It is a method of payment where the cheque is made out to the owner or bearer of the document. Bearer cheques enable the holder to cash or deposit the cheque without any requirement for identification or endorsement, in contrast to other cheques payable to a specific person or business.

  • Jun 06, 2023
Best Indicators for Intraday Trading

Introduction Intraday trading, also known as day trading, is a fast-paced trading strategy where traders aim to take advantage of short-term price fluctuations in financial markets. To succeed in this highly competitive arena, traders rely on various best indicators for intraday to make informed decisions and maximize their chances of profitability.

  • Jun 06, 2023
Nifty Outlook for 7 June 2023

Nifty started the day around 18600, but it witnessed selling pressure as the IT stocks corrected sharply and thus the benchmark index traded under pressure. However, the index recovered the losses from the lows towards the end and closed around the opening levels with a negligible loss.

  • Jun 06, 2023

Start Investing Now!

Open Free Demat Account in 5 mins

Enter Valid Mobile Number