Could telecom operator Vodafone Idea shut shop soon?

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.