UK-based Vodafone Plc on Tuesday expressed uncertainty over the payment obligations of Vodafone Idea (VIL), its joint venture (JV) in India with the Aditya Birla group.
“VIL remains in need of additional liquidity support from its lenders and intends to raise additional funding. There are significant uncertainties in relation to VIL’s ability to make payments in relation to any remaining liabilities covered by the mechanism and no further cash payments are considered probable from the Group as at March 31, 2023,” Vodafone Plc said in its FY23 results.
While Vodafone Plc owns a nearly 32% stake in VIL, the Aditya Birla group owns an 18% stake.
Although VIL took steps to enhance its liquidity and financial health by issuing equity worth `16,100 crore to the government of India, uncertainties persist regarding the company’s ability to meet its remaining liabilities covered by the agreed mechanism.
“VIL is currently in need of additional liquidity support from its lenders and plans to secure additional funding. However, as of March 31, 2023, no further cash payments from Vodafone Plc are deemed probable,” said Vodafone Plc.
The company further said the carrying value of the group’s investment in VIL is nil and the group is recording no further share of losses in respect of its Indian JV. “The Group’s potential exposure to liabilities within VIL is capped by the mechanism,” Vodafone Plc said.
As part of the agreement to merge Vodafone India and Idea Cellular in 2017, the parties agreed a mechanism for payments between Vodafone Plc and VIL pursuant to the difference between the crystallisation of certain identified contingent liabilities in relation to legal, regulatory, tax and other matters, and refunds relating to Vodafone India and Idea Cellular.
Cash payments or cash receipts relating to these matters must have been made or received by VIL before any amount becomes due from or owed to Vodafone Plc.
“The Group’s potential exposure under this mechanism is capped at `6,400 crore following payments made under this mechanism from Vodafone to VIL, in the year ended March 31, 2021, totalling `1,900 crore,” Vodafone Plc said.
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 `2.23 trillion, comprising deferred spectrum payment obligations of `1.39 trillion, AGR liabilities of `69,910 crore that are due to the government, and debt from banks and financial institutions of `13,190 crore.