Vodafone Idea is estimated to face an annual outflow of INR 5900 to 6253 cr range. Which depends on an 8% or 9% interest rate. If the nation’s top court allows it to clear Vodafone Idea AGR dues of around INR 50400 cr over 15 years. Shares of the telco plunged nearly 9% in intraday trade.
Underlining the uphill task before the cash-strapped carrier. Even in the case of relief from the top court which could save off immediate bankruptcy.
Such a scenario would also require the telco to at least double its current average revenue per user by FY23. When its two-year deferred spectrum payment moratorium ends.
Hold on to it’s near 291 million subscribers, and net a significant capital infusion to be competitive in the market. Else risk being relegated to a regional player at best.
In a report, Credit Suisse added that Vodafone Idea Limited would need meaningful equity infusion by the 2HFY23. Apart from strong operational improvement. Even if the telco manages to secure a 15-year deferred (AGR) payment plan.
Analysts said Bharti Airtel, by contrast, is in a far more comfortable position to pay its comparatively smaller AGR balance dues of nearly Rs26000 cr. Even in 10 years or less by virtue of its stronger balance sheet helped by successive rounds of fundraising over the last couple of years.
The Supreme Court of India in its order on how much time Vodafone Idea AGR dues. Airtel would get to clear their AGR dues.
Both incumbents have offered to pay the money in 10 years. Even while the government stood by its proposal to give them 20 years.
Airtel and Vodafone Idea Limited have so far paid Rs 18,004 cr. and Rs 7,854 cr., respectively.
Order to boost Vodafone Idea to ramp-up its 5G testing and can throw the challenge to both Reliance 5G & Airtel 5G.
Securities Companies are estimating that if the Supreme Court were to ask Vodafone Idea Limited to clear Vodafone Idea AGR dues in 10 years. The annual outgo would be in the Rs 7,500-7,853 cr. range.
They have pegged the applicable interest rate at 8-9%, benchmarking it to the prime lending rate (PLR).
To arrive at the annual AGR installment estimates under a staggered repayment model in a 20-year payment scenario. Vodafone Idea Limited installments they estimate would be in the INR 5,100-5,521 cr range.
By contrast, Airtel’s annual outflows towards AGR payments (including interest) are estimated at around INR 3900-4048 cr. INR 3,000-3,223 cr. and INR 2,600-2,846 cr. for staggered repayments over 10, 15, and 20 years respectively.
On 21st July afternoon trade BSE shares of Vodafone Idea Limited were 7.9% lower at Rs 8.33. While Airtel’s down by 1% at INR 570.
Even if 20 years of staggered payments are granted. Vodafone Idea Limited annual AGR payment will jump from 5% to 30%, of its cash Ebitda (earnings before interest, tax, depreciation & amortization) over FY21/22.
Vodafone Idea Limited needs to at least double monthly ARPU (from the current level of INR 121) via two sharp tariff hikes in the next two years and ensure zero customer losses from here on to ensure AGR dues repayments, post FY23. The struggling telco’s ARPU would need to exceed Rs 225 beyond FY23.
Analyst estimates Vodafone Idea Limited would require an INR 85 increase in ARPU to achieve Ebitda of INR 30,000 cr. by FY22 (from current estimated operating income level of Rs 9,700 cr by FY22) to meet cash obligations on multiple scores.
Including INR 16,500 cr. for deferred spectrum liability INR 5,100 cr for annual AGR payouts over 20 years. The cash interest cost of INR 3,000 cr. to lenders and INR 5,300 cr towards the annual CAPEX.
Vodafone Idea AGR dues due to weak cash position with estimated outstanding cash & equivalents of a modest INR 2,660 cr in FY20. Coupled with a high leverage ratio that has risen to 7.6x in the March quarter from 7.4x in the earlier one, triggered by the telco’s net debt rising to INR 1,12,500 cr from December.