The news, which came a day before Vodafone Idea’s board of directors meeting on fundraising, sent Vodafone Idea’s shares up 13.52 percent to 11.25 rupees. The stock had gained 11.86 percent in the previous session.
People with knowledge of the matter had previously told ET that the distressed operator is close to immobilizing the funds as clarity has emerged for the telco about AGR’s payment terms. The Supreme Court, in its ruling on Tuesday, gave the mobile operator 10 years to pay the government fees.
Vodafone Idea, which is a joint venture between Great Britain’s Vodafone Group Plc and India’s Idea Cellular, had previously said that its ability to continue as a going concern was based on a positive audience result.
Brokers like Motilal Oswal said the telecom operator can at least manage to pay FY 21 fees without raising rates. For that, the company needs to raise at least $ 3-4 billion through a combination of capital infusion by developers, rights issuance, and potential sale of fiber and data center assets.
In the next year, it would require more funding, in addition to price increases. Vodafone Idea may also seek additional support from the government in the form of an additional two-year moratorium on deferred spectrum liabilities to remain solvent beyond FY23, analysts said.
Motilal Oswal believes that Vodafone Idea would require a total cash requirement of Rs 14,100 in FY 21, including a capital expenditure of Rs 6,400 crore and an initial amount of Rs 5,800 crore for AGR, along with a cash interest cost of Rs 1900 crore. “This is against Rs 5,100 crore from operating cash flow, Rs 7,100 crore from Vodafone PLC and Rs 4,000 crore from the sale of Bharti Infratel stake,” the brokerage said.
In FY 22, the company would require an annual AGR liability payment of Rs 6,600 crore, increasing its annual requirement to Rs 16,100 crore. Motilal estimates that the company will generate Rs 12,300 crore in operating cash flow and its fiscal year 21 cash balance.
“Therefore, to offset the cash requirement, you would have to take a 22% price increase to manage the financing requirement. However, from fiscal year 23 onwards, your cash requirement should increase to Rs 32,700 inclusive. a deferred spectrum liability of Rs 16,500. The company may require a large round of price hike, coupled with a capital increase, to fill the gap, “he said.
Edelweiss said the SC ruling granting 10 years to pay AGR (up from the 15 years required) is likely to further restrict Vodafone Idea’s access to finance.
Analysts noted that the company had increased its Ebitda by just Rs 1,200 crore, despite 25% rate increases in December last year, thanks to the loss of subscribers. This led them to believe that only price increases can be viable in solving the company’s cash flow problems.
“Vodafone Idea remains in a difficult situation even as the court verdict offers short-term cash flow relief. The company needs a combination of rapid and sharp improvement in prices, flawless delivery of new opex cut targets, expenses of the competitive network to stop the trend of the erosion of market share and some injection of capital, “said Kotak Securities.
The brokerage said the capital injection will require confidence in price visibility. “The odds of VIL surviving without a significant price increase are grim. The equity injection would also require price increases,” he said.
Vodafone still owes DoT over Rs 50 billion according to the original claim.
“If ARPUs approach Rs 180-200 along with existing subscriber retention, the stress on the telco is expected to ease,” Brickwork Ratings said.
Jefferies said the company would need additional government support in the form of an additional 2-year moratorium on deferred spectrum liabilities to remain solvent beyond fiscal year 23.
.
