Vodafone Idea’s debt is a major concern for the management and investors. The company has been struggling with a substantial debt burden that has impacted its ability to grow and compete in the highly competitive telecom market.
We will explore the specifics of Vodafone Idea’s debt and fundraising efforts.
Vodafone Idea’s Total Debt as of March 2024
As of March 2024, Vodafone Idea’s total debt is a staggering ₹2.458 lakh crore. This large debt figure includes various obligations, with the two most significant contributors being deferred spectrum payment obligations and Adjusted Gross Revenue (AGR) liabilities.
- Deferred Spectrum Payment Obligations: ₹1.39 lakh crore
- Adjusted Gross Revenue (AGR) Liability: ₹70,320 crore
- Debt from Banks and Financial Institutions: ₹6,050 crore
This debt burden has been a major hindrance to Vodafone Idea’s financial health, significantly influencing its ability to invest in 5G and upgrade the 4G network. For more insights on the impact of AGR on Vodafone Idea share, check out our AGR commentary, Click here.
Vodafone Idea Debt Repayment Schedule
Vodafone Idea’s debt repayment is spread over the next 10 years. Here’s a breakdown of the company’s upcoming debt commitments:
- 2024: Vodafone Idea is scheduled to repay ₹5,400 crore in debt.
- 2025-2026: Between October 2025 and March 2026, the company will owe ₹12,000 crore to the government.
- FY27-FY31: Vodafone Idea will have to pay ₹43,000 crore annually during this period, primarily for spectrum payments and AGR dues.
This repayment schedule poses significant pressure on the company’s cash flows, further complicated by its need to invest in 5G networks to stay competitive in the Indian market.
What is Vodafone Idea’s current debt-to-equity ratio, and how does it impact the company’s financial stability?
The debt-to-equity ratio is a critical metric that reflects how much of the company’s financing comes from debt compared to equity. For Vodafone Idea, this ratio has been impacted by its substantial debt load and recent fundraising efforts.
In 2024, Vodafone Idea raised about ₹24,000 crore through various equity measures, including a ₹18,000 crore follow-on public offering (FPO). Additionally, Aditya Birla Group infused ₹2,075 crore into the company. Despite these efforts, the company’s debt-to-equity ratio remains high due to the overwhelming debt.
Fundraising Efforts and Cash Reserves For Vodafone Idea Debt Problem
Vodafone Idea has made concerted efforts to raise funds to manage its debt and finance future operations. Some key milestones include:
- Fundraising Total: The company raised ₹24,000 crore, primarily through equity.
- Aditya Birla Group Contribution: ₹2,075 crore was infused earlier in 2024.
- Government Stake Reduction: The Indian government reduced its stake in Vodafone Idea to 23.8% from 33% following the FPO.
- Cash Reserves: Vodafone Idea’s cash and bank balance increased to ₹18,150 crore as of June 30, 2024, after these fundraising efforts.
In addition to raising funds, Vodafone Idea is actively seeking debt funding from a consortium of banks to fuel its network expansion plan, with plans to secure up to ₹25,000 crore along with non-fund-based facilities of ₹10,000 crore.
The Indian government holds a significant 23.8% stake in Vodafone Idea, with no immediate plans to divest. According to sources cited by Moneycontrol.
The government became a shareholder in February 2023, following its approval of Vodafone Idea’s plan to convert approximately ₹16,000 crore of interest liability into equity. This move was part of the broader telecom reforms announced in the 2021 relief package.
Furthermore, the government is reviewing Vodafone Idea’s request for a waiver of bank guarantees related to regulatory dues of ₹24,747 crore. If approved, this waiver could significantly ease Vodafone Idea’s financial burden and allow it to focus on improving its operations.
Conclusion
Vodafone Idea’s total debt of ₹2.458 trillion is a significant obstacle to its financial recovery and growth in the telecom sector. With substantial obligations in the form of deferred spectrum payments and AGR liabilities, the company is under immense pressure to restructure its debt. However, recent fundraising efforts, including FPO, Birla group, and government involvement provide support for the short-term.
While Vodafone Idea faces a daunting debt repayment schedule of AGR, ongoing talks with banks for further funding, coupled with potential regulatory relief, may help stabilize the company’s operations.