After the Centre’s nod to convert Vodafone Idea’s ₹1,600 crore debt into equity, the struggling operator is redialing banks for additional funding. The banks had earlier declined to extend further lines of credit because of the delay in the equity conversion by the Centre.
“The debt to equity conversion was one of the conditions set by the banks, so the operator will go back to the banks after the Centre takes a stake in the company,” said an industry source.
The company has been trying to raise funds for almost two years. In September 2020, Vodafone Idea’s board approved a ₹25,000 crore fundraising plan, which would help tide them over the crisis. While promoters invested ₹4,900 crore, the company had made no headways on external infusion funds. The company hopes to raise ₹10,000 crore as additional loans from banks.
As the Centre kept delaying converting Vi’s debt to equity, the company’s fundraising plans essentially stalled completely in the last few months. With impending dues on the horizon, particularly for network vendors, Vodafone Idea also approached banks for emergency loans worth ₹7,000 crore. No headway was made, however, as banks refused to extend credit without the Centre’s equity conversion. Banks had made it clear that they would not be giving Vi loans until the Indian government joined the company as a shareholder, since that would provide some guarantee on the survivability of the company.
At the end of the July-September quarter, Vodafone Idea’s gross debt (excluding lease liabilities and including interest accrued but not due) was at ₹2.20 lakh crore, comprising deferred spectrum payment obligations of ₹1.36 lakh crore, AGR liabilities of ₹68,590 crore that are due to the government, and debt from banks and financial institutions of ₹15,080 crore.
According to the company, ₹9,600 crore of debt is payable by September 2023, while its gross cash balance as of September 2022 is ₹200 crore. Analysts have estimated that the company will have a cash shortfall of ₹6,400 crore by September 2023, assuming that all debt is repayable.
Vodafone has also suspended any 4G and 5G capex, which will only commence once the company is able to raise funds.
Vodafone Idea had not responded to businessline’s email questionnaire on this matter at the time of filing the story.