“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 bank told ET.
Lenders sought clarity on the government’s potential shareholding in the telco, plans for promoters to infuse equity to shore up investor confidence and business scale-up.
An official at another lender said Vi has asked them to factor in Rs 15,000 crore bank guarantees and grant fresh loans.
Monthly Dues to Indus at Rs 250-300 cr The bank guarantees were returned by the government last year under a revival package for the sector.
Co-promoted by the UK’s Vodafone Plc and India’s Aditya Birla Group (ABG), Vi needs the cash quickly as its dues to Indus have mounted to around Rs 7,500 crore. It has given a commitment to the tower company to pay 100% of its current dues from January onwards, and also clear its outstanding as of December 31, 2022, over seven months, starting this month.
Vodafone Idea’s monthly dues to the tower company are estimated at Rs 250-300 crore, said a person aware of the situation.
Indus previously warned Vi it would disconnect access to tower sites unless its payments were cleared. The telco had subsequently given the deferred payment proposal, which was accepted by the tower company.
As of press time, ET’s queries to Vi and ABG were unanswered. UK’s Vodafone and Indus declined to offer comment. Queries to SBI, PNB, HDFC Bank and IDFC First did not elicit a response.
One of the officials quoted earlier said the banking system cannot give loans to a company that has a negative net worth, and that there was no guarantee that these loans would be repaid. Vi had a negative net worth of Rs 75,830.8 crore as of September end, FY23.
The company had previously approached SBI with a Rs 16,000-crore loan request but that hasn’t been sanctioned so far.
“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,” said a person familiar with familiar with the thinking at the tower company.
Indus in Trouble
Indus itself is facing a tough financial situation due to Vodafone Idea’s unpaid dues. It reported a 44% on-year fall in its September quarter net profit to Rs 872 crore, stung largely by a provision of Rs 1,770.9 crore towards doubtful debt, related to the company’s receivables from Vi. Indus’ trade receivables rose 4% sequentially in the September quarter to Rs 6,499 crore, largely due to the delayed payments.
“Vi’s financial constraints have led to a ballooning of Indus’ receivables,” Kotak Institutional Equities said in a note 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 revenue, and accordingly, as much as 10% of the tower company’s annual overall revenue could be at risk due to Vi’s cash 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 needs funds urgently to clear its substantial dues to large vendors such as Nokia and Ericsson. It also needs cash to roll out 5G services, expand its 4G coverage to arrest customer losses to financially stronger rivals Airtel and Jio.
Vi was saddled with a net debt of around Rs 2.2 lakh crore in the second quarter and ended it with a modest gross cash balance of Rs 190 crore. Its Rs 9,600-crore upcoming debt repayment by September 2023 could further shackle the telco’s ability to incur capex, underlining the need for an urgent and substantial capital raise.
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