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Vodafone focuses on bank repayments post-reprieve

Vodafone Idea’s liabilities, including regulatory dues, stood at Rs 1.9 trillion as of 31 March, a sum it must pay before the moratorium ends

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With the government granting a four-year moratorium on regulatory dues, Vodafone Idea Ltd will now have to focus on repaying banks and seeking funding for 5G spectrum purchases.

The telecom operator has to repay Rs 9,000 crore worth of loans to banks before the end of this fiscal, including Rs 5,000 crore of non-convertible debentures, according to a senior banker aware of the matter. Lenders expect the company to raise Rs 15,000-20,000 crore from investors this year, the banker said on condition of anonymity.

Vodafone Idea’s gross liabilities, including regulatory dues, stood at around Rs 1.9 trillion as of 31 March. The company owes a total of Rs 48,000 crore to eight banks led by Bank of India. Of this, borrowings amount to Rs 23,000 crore, and the rest is in the form of bank guarantees.

The annual debt repayment of Vodafone Idea is likely to be around Rs 6,000 crore over the next two years, two bankers, including the person cited above, said. Moreover, after the four-year moratorium, payments to the government are set to increase for Vodafone Idea.

Queries emailed to spokespeople for Vodafone Idea and did not elicit a response till press time.

According to Nomura, Vodafone Idea’s annual dues repayment post the four-year holiday will increase from Rs 24,800 crore currently to Rs 43,000 crore, while dues to the government will likely grow from Rs 1.6 trillion as of FY21 to Rs 2.2 trillion after the moratorium ends.

That said, the government has done away with requirements for multiple bank guarantees, and telecom companies can have a single bank guarantee for different licensed service areas. For future spectrum auctions, telcos will not be required to provide bank guarantees to secure instalment payments, which essentially means lower debt.

“We think it is positive for telcos, as bank guarantees end up blocking surplus cash in the form of margin money,” Nomura said in a research report on 16 September. “Moreover, lenders have been wary of providing long-term bank guarantees to telcos. On a ballpark basis, this will lead to Rs 80,000 crore lower bank guarantee requirements for the three private telcos,” it said.

Vodafone Idea will have to focus on procuring capital to invest in infrastructure. It has been trying to raise funds since last September after the Supreme Court ordered telcos to pay adjusted gross revenue-related dues of Rs 1.8 trillion over 10 years till March 2031. “Vodafone will continue to be a weak player till it overcomes structural deficiencies such as converting 2G into 4G subscribers. This package will help them get foreign capital,” the second banker said.

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