AGR dues: Vodafone Idea to raise funds after clarity from Supreme Court

In the past the company’s promoters have said that they are not going to put in any more funds as it would amount to putting good money after bad.

Vodafone Idea on Friday said that once there’s clarity on the adjusted gross revenue (AGR) matter, it would take “suitable actions to get the business and company adequately funded”. The statement by the company’s CFO Akshaya Moondra in an analyst call, post the April-June quarter results which came on August 6, assumes significance because it is for the first time since the AGR judgment came in October 2019 that the management has talked of raising funds.

In the past the company’s promoters have said that they are not going to put in any more funds as it would amount to putting good money after bad. “It does not make sense to put good money after bad. That would be end of story for us. We will shut shop,” Vodafone Idea chairman Kumar Mangalam Birla had said in December 2019, in response to a question if Vodafone Idea will put in more money.

In response to a question by an analyst — “Assuming the SC allowed deferred payments, can you share your thoughts on your need for funds and asset monetisation plans? Have you had any conversation with promoters on the way forward?”, Moondra said, “With respect to the AGR judgment we will get clarity on what’s our funding requirements for servicing all these things plus what is our additional investment needs. Based on that we will take suitable actions to get the business and company adequately funded. I think we can discuss that once we have clarity on AGR matter in terms of final period of repayment.”

As reported earlier, Vodafone Idea has prayed the apex court that it be allowed to pay its AGR dues which amounts to Rs 58,250 crore spread over a 20-year period. In any case, it should not be less than 15 years. The SC had on July 20 reserved its order on this prayer of the company. Of the total due amount the company has so far paid close Rs 8,000 crore.

Raising funds is quite critical for Vodafone Idea’s survival as without it, it can best manage till FY22 and that too because there’s currently a two-year moratorium on payment of deferred spectrum installments. The precarious financial position of the company can be gauged from the fact that its cash and cash equivalents stands at Rs 3,450 crore while its net debt is at Rs 1.16 lakh crore.

“Continued cash burn and AGR payments have meant Vodafone Idea continuing to under invest. Its 1QFY21 capex of Rs 600 crore is at historically low levels, less than one-fourth of its trailing twelve months average quarterly capex of Rs 2,500 crore. In contrast, Bharti Airtel invested Rs 2,600 crore in 1QFY21. We believe that VIL needs meaningful capital infusion on urgent basis to break out of this vicious loop of under-investment and market share loss,” brokerage Credit Suisse wrote on the company’s performance during the April-June quarter.

The company had on Thursday once again posted one of its biggest losses during the April-June quarter at Rs 25,467 crore, largely weighed down by its AGR dues. The losses were much wider than Rs 11,643.50 crore the company had incurred during the preceding quarter. During the quarter the company provisioned Rs 19,440 crore towards its AGR dues, and once again stated that its ability to continue as going concern is essentially dependent on a positive outcome with regard to the timeframe for the payment of AGR dues to be made in installments and successful negotiations with lenders. Even if the AGR provisioning is not taken into account, the company’s operational performance during the quarter was weak with revenues at Rs 10,659.30 crore sequentially declining by 9.3%.