New Delhi: The government’s decision to convert Rs 36,950 crore dues of Vodafone Idea (VIL) into equity is a “major” and “timely” display of support that will offer significant cash flow relief to the telco in the next three years and help it complete long-delayed bank debt raise, Citi said on Monday.
“Overall, we view this as a major display of support by the government in a very timely manner, which should provide significant cash flow relief to VIL in the next 3 years and help it complete its bank debt raise,” the brokerage said in its latest report.
Throwing a lifeline to the troubled telecom operator, the government has decided to convert Rs 36,950 crore of VIL’s outstanding spectrum auction dues into equity, under the provisions of the September 2021 telecom reforms package. The government shareholding in VIL will correspondingly increase to 48.99 per cent from 22.6 per cent.
VIL promoters will, however, continue to have operational control of the company. Citi termed the “material development” as having significant positive implications for the company. “The conversion of spectrum dues to equity will bring down VI’s overall net debt by nearly 18 per cent. We estimate VI’s spectrum dues (for pre-2021 spectrum) that are payable over FY26/27/28E could reduce from Rs110/250/250 billion (Rs 11,000/25,000/25,000 crore) to nearly Rs5/50/150b billion (Rs 500/5,000/15,000 crore), implying over Rs 400 billion (Rs 40,000 crore) of cash flow relief over the next three years,” it said. This should help VI move one step closer to completing its long-delayed debt raise from banks, Citi said.