Consultants Review Team
Vodafone Idea (Vi) has dialled a number of lenders — State Bank of India, Punjab National Bank, HDFC Bank and IDFC First, amongst others — to line up loans aggregating upward of Rs 7,000 crore. The bulk of the loans will probably be used to clear a portion of its dues to Indus Towers, three individuals conscious of the matter stated.
“Yes, Vi has approached us for a loan, but we haven’t committed anything to them; it’s at a logjam,” a senior official at a financial institution informed ET.
Lenders sought readability on the federal government’s potential shareholding within the telco, plans for promoters to infuse equity to shore up investor confidence and enterprise scale-up.
An official at one other lender stated Vi has requested them to think about Rs 15,000 crore bank guarantees and grant contemporary loans.
The financial institution ensures have been returned by the federal government final yr beneath a revival package deal for the sector.
Co-promoted by the UK’s Vodafone Plc and India’s Aditya Birla Group (ABG), Vi wants the money rapidly as its dues to Indus have mounted to round Rs 7,500 crore. It has given a dedication to the tower firm to pay 100% of its present dues from January onwards, and likewise clear its excellent as of December 31, 2022, over seven months, beginning this month.
Vodafone Idea’s month-to-month dues to the tower firm are estimated at Rs 250-300 crore, stated an individual conscious of the scenario.
Indus beforehand warned Vi it will disconnect entry to tower websites until its funds have been cleared. The telco had subsequently given the deferred cost proposal, which was accepted by the tower firm.
As of press time, ET’s queries to Vi and ABG have been unanswered. UK’s Vodafone and Indus declined to supply remark. Queries to SBI, PNB, HDFC Bank and IDFC First didn’t elicit a response.
One of the officers quoted earlier stated the banking system can’t give loans to an organization that has a destructive internet price, and that there was no assure that these loans can be repaid. Vi had a destructive internet price of Rs 75,830.8 crore as of September finish, FY23.
The firm had beforehand approached SBI with a Rs 16,000-crore mortgage request however that hasn’t been sanctioned to this point.
“Vi could face stern action from Indus if it fails to meet the latest payment timelines, starting from January…if it does not pay up on time, things could escalate and stronger measures to recover its dues may be discussed at Indus’ next board meeting later this month,” stated an individual acquainted with acquainted with the pondering on the tower firm.
Indus itself is dealing with a tricky monetary scenario attributable to Vodafone Idea’s unpaid dues. It reported a 44% on-year fall in its September quarter internet revenue to Rs 872 crore, stung largely by a provision of Rs 1,770.9 crore in direction of uncertain debt, associated to the corporate’s receivables from Vi. Indus’ commerce receivables rose 4% sequentially within the September quarter to Rs 6,499 crore, largely because of the delayed funds.
“Vi’s financial constraints have led to a ballooning of Indus’ receivables,” Kotak Institutional Equities stated in a observe seen by ET. “Given Vi’s inability to make timely payments, Indus’ receivables will continue to rise and will likely have to be provisioned for (Rs 3,000 crore bad debt provisions in H1 FY23) and ultimately be written off.”
The brokerage added that the cash-strapped telco accounts for over 40% of Indus income, and accordingly, as a lot as 10% of the tower firm’s annual total revenue might be in danger attributable to Vi’s money shortfall.
“Despite the recent equity infusion (over Rs 4,900 crore) by Vi’s promoters and the subsequent repayment of Indus’ past dues, Vi still owes Rs 7,500 crore to Indus. Given the continued market share decline, Vi’s fundraise will be challenging and it will continue to take a toll on Indus,” Kotak warned. Over Rs 3,000 crore of the funds raised was paid by Vodafone Idea to Indus.
Additionally, Vi wants funds urgently to clear its substantial dues to massive distributors similar to Nokia and Ericsson. It additionally wants money to roll out 5G providers, develop its 4G protection to arrest buyer losses to financially stronger rivals Airtel and Jio.
Vi was saddled with a internet debt of round Rs 2.2 lakh crore within the second quarter and ended it with a modest gross money stability of Rs 190 crore. Its Rs 9,600-crore upcoming debt compensation by September 2023 may additional shackle the telco’s potential to incur capex, underlining the necessity for an pressing and substantial capital increase.