AGR dues: After SC denies relief, is it the end of road for Vodafone Idea?

There was gloom at the headquarters of Vodafone Plan in Mumbai on Friday, with best executives saying the corporation would not be able to choose the more Rs 54,000-crore hit and it would now close up in individual bankruptcy court.

“It would be tough for the corporation to survive soon after this judgment,” stated a Vodafone executive.

Vodafone Idea’s internet value (or shareholders’ equity) was down 73 per cent yr-on-yr to all-around Rs 17,600 crore at the close of the December 2019 quarter soon after the corporation described a internet reduction of all-around Rs 6,400 crore in the course of the quarter. Cumulatively, the corporation has dropped nearly Rs 45,000 crore in the past 4 quarters, eroding its internet value to its least expensive level in three-yr.

Analysts stated a this sort of a small level of internet value, coupled with continuing losses in operations, ruled out the probability of the corporation getting refreshing loans from loan providers to fund its altered gross income (AGR) dues.

“On what basis will financial institutions give refreshing loans to the corporation? The corporation is managing out of assets to back refreshing borrowing,” an analyst stated.

Immediately after its 3rd-quarter results, Vodafone Idea’s very long-phrase credit card debt-to-equity ratio shot up to 5.7x, generating it one the most indebted businesses in the place.

In comparison, its leverage ratio was 1.3x at the close of the March 2019 quarter. The ratio worsened to 6.6x at the close of December 2019 if the present-day maturities of its very long-phrase credit card debt have been to be taken into account.

The corporation has to repay very long-phrase debts value Rs fourteen,800 crore by the close of FY20, in accordance to its filing for Q3FY20.

Not shockingly, a lot of analysts are expecting the corporation to file for individual bankruptcy at the time its internet value turns damaging in the subsequent couple quarters.

Vodafone Idea’s inadequate economical functionality also led to a sharp decrease in its industry capitalisation in the past one yr, generating it tough for the corporation to increase refreshing equity in the way Bharti Airtel did a couple months back.

At its present-day share rate, Vodafone Plan has a industry capitalisation of all-around Rs 10,000 crore, which is a portion of its impending liabilities and least expensive considering the fact that its listing in 2007 as Plan Mobile.

The corporation experienced a industry capitalisation of all-around Rs 22,000 crore at the time of its listing in March that yr. Analysts stated the corporation necessary a huge equity infusion from its promoters — Aditya Birla team and Vodafone plc — to remain solvent and pay its AGR dues.

The promoters have resolved not to place in more hard cash into the corporation soon after each dropped a sizeable total by investing in the company’s Rs twenty five,000-crore rights situation past yr.

Vodafone plc owns 44.39 per cent in Vodafone Plan though the Aditya Birla team has 27.18 per cent.

As the Aditya Birla team has not supplied any company guarantees on loans value Rs 1.15 trillion, there will not be any damaging effects on the team businesses and their losses be minimal to the equity stake in the corporation, stated an analyst.

VIL experienced designed a provision of Rs 44,a hundred and fifty crore (Rs 27,610 crore for licence costs and Rs sixteen,540 crore toward spectrum utilization charges) until the quarter ended September 30, 2019, for the disputed liabilities toward AGR. The present liquidity (about Rs 15,390 crore as of September 30, 2019) will be insufficient if there is a payout of licence payment liabilities of Rs 27,610 crore.

Nick Go through, chief executive officer of Vodafone plc, warned in November past yr Vodafone Plan faced an imminent collapse soon after the Supreme Courtroom judgment on Oct 24, which questioned the businesses to pay the dues inside three months. The deadline expired in January this yr.

This raises the probability of Vodafone exiting India if Vodafone Plan is compelled to suspend operations owing to economical issue. In the past Vodafone plc has exited all-around 8 marketplaces. But all those exits have been mostly owing to business motives and the corporation designed money in most of these exits.

For instance, Vodafone plc exited its US joint enterprise Verizon Wireless for a thing to consider of nearly $one hundred thirty billion though it marketed its stake in an Egyptian joint enterprise for nearly $two.4 billion.