Aditya Birla Group chairman Kumar Mangalam Birla’s return to Vodafone Idea’s board last month has been welcomed by the market as it boosts investor confidence in the company’s prospects, said analysts.

They also feel that it would help the company raise funds, something it has been trying for a long a time.However, key concerns remain. The company needs to service bank debt of around Rs 8,000 crore by December-end, and still has not been able to roll out 5G services.

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“No doubt that with Birla joining back the company’s board, chances of fund raise have improved. However, weak balance sheet remains a concern,” a Mumbai-based analyst with a leading brokerage firm said.

According to analysts, it is not that by just raising Rs 10,000 crore everything would be back on track for Vodafone Idea.

At a time when competitors Bharti Airtel and Jio are having an annual capital expenditure of about Rs 25,000 crore and rolled out 5G in over 5,500 cities, Vodafone Idea’s weak cash flow, lower spends on the network as well as future debt obligation at the end of moratorium will also be looked at by any prospective lender or investor.

According to industry executives, banks have done the due diligence on Vodafone Idea way before the government converted its interest dues worth Rs 16,000 crore into equity. However, they were only waiting for the promoters to show their commitment towards the company.

With Birla back on board, banks would expect substantial investments by the promoters also, industry executives said.

In February, the government converted Vodafone Idea’s interest dues and became the single largest shareholder in the company with a 33.4% stake. The government’s interest conversion came only after the promoter assured of making investments into the company.

Three months after the conversion, no additional fund infusion has taken place. Besides, the company is yet to meet the government’s minimum rollout obligation for the first year to launch 5G services.

“I thought as a promoter it is only right that I also indicate my willingness to take the business forward which is why the decision to come back on the board (was taken),” news agency PTI had quoted Birla last month.

At the end of the October-December quarter, Vodafone Idea’s gross debt (excluding lease liabilities and including interest accrued but not due) rose to Rs 2.23 trillion, comprising deferred spectrum payment obligations of Rs 1.39 trillion, AGR liabilities of Rs 69,910 crore that are due to the government, and debt from banks and financial institutions of Rs 13,190 crore.

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Once the moratorium ends in September 2025, the company’s annual instalments for spectrum and adjusted gross revenue (AGR) dues would come around Rs 43,000 crore. Based on the company’s cash Ebitda, Vodafone Idea is expected to have a gap of Rs 30,000 crore, according to analysts.

“Our base case remains that Vodafone Idea will be a going concern and we assume in the long term that a part of outstanding debt on spectrum and AGR will also be equitised by the government. While headline sub losses sustain, key driver for the stock post-equitisation of part government debt is debt refinancing and capital infusion in the medium term,” JP Morgan said.

Vodafone Idea needs to improve Ebitda (tariff hikes) and simultaneously reduce debt (raise equity) to remain financially viable. It also needs to invest in the network and arrest subscriber decline. The above three conditions are necessary, but might still not be sufficient for its long-term sustainability,” Nuvama Institutional Equities said.

The company is yet to declare its earnings for the January-March quarter. Analysts expect the company to witness a fall in revenue sequentially in January-March quarter. Vodafone Idea’s losses for the quarter are seen at Rs 8,104 crore, higher than Rs 7,990 crore in the October-December quarter, according to average estimates of four brokerage houses.

“We expect VIL to once again show revenue decline at 1.8% qoq (quarter-on-quarter), implying further market share loss,” brokerage house BofA Securities said, adding that the company is expected to have lost 3.5 million subscribers.

“We await clarity of potential capital injection by promoters in the group given very high leverage,” the brokerage added. As of January-end, the company has an overall market share of 21%, down from 23.2% in the year-ago period. In January, the company has lost about 1.36 million wireless subcribers. For the straight 22nd month, Vodafone Idea has lost 43.75 million subscribers. According to Trai data, the company had a mobile subscriber base of 239.96 million as of January end.