Banks Eye Vodafone Idea Funding After Govt AGR Dues Relief
Overview
Lenders, led by State Bank of India, are reassessing fresh funding for Vodafone Idea after the government approved a relief package freezing AGR dues and extending repayments over 16 years. The move alters the telco's liability profile, requiring banks to scrutinize Vi's updated funding needs and business plans amid significant debt.
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Banks Reassess Vodafone Idea Funding Amid AGR Relief
Banks, spearheaded by State Bank of India, are initiating a review of fresh funding proposals for Vodafone Idea Limited (Vi). This reassessment follows the government's recent approval of a significant relief package that freezes the telecommunications company's Adjusted Gross Revenue (AGR) dues and stretches repayment terms over sixteen years.
Bankers indicated that the government's intervention has fundamentally altered Vi's liability structure. This development necessitates a clear understanding of the company's revised funding requirements and long-term business strategies before any new capital can be considered. Lenders have long been hesitant to extend credit to Vi due to its substantial liabilities, including deferred spectrum payments and AGR obligations, coupled with strained cash flows.
AGR Dues Restructured
The Department of Telecommunications (DoT) has frozen Vi's AGR dues amounting to ₹87,695 crore for the period spanning 2006-07 to 2018-19. Under the new schedule, Vi will be obligated to pay ₹124 crore annually for six years, from March 2026 through March 2031. Subsequently, payments will reduce to ₹100 crore per year for four years until March 2035. The remaining balance is slated for repayment in equal annual installments over a six-year period concluding in March 2041. This effectively means approximately 95% of Vi's AGR liability will remain frozen for the next decade.
Funding Needs and Outlook
Vodafone Idea had previously outlined plans requiring approximately ₹35,000 crore. The current assessment will determine the revised capital needed and its feasibility based on the company's projected cash flows. A senior banking executive noted that such a substantial amount would likely require a consortium of lenders. While many banks may have reduced or eliminated their direct exposure to Vi as previous loans were repaid, they remain actively engaged.
The telco, grappling with a total debt of nearly ₹2 lakh crore, primarily statutory dues including ₹1.2 lakh crore in spectrum liabilities, faces a critical need for fresh capital. An equity raise of over ₹20,000 crore in April 2024 has reportedly been fully utilized, underscoring the urgency for further investment in network upgrades and operations. With the AGR overhang now clarified, both debt and equity funding avenues are being considered, potentially involving a mix of both. Experts also suggest that Vi might explore tapping equity markets or attracting a strategic investor, a possibility previously reported concerning interest from US PE firm Tillman Global Holdings.
