Brickwork noted that the company has successfully raised equity amounting to Rs 25,000 crore through rights issue, which has improved the current liquidity position as well as the gearing.
Vodafone Idea’s (VIL) long-term non-convertible debentures (NCD) of Rs 3,500 crore were downgraded by Brickwork Ratings on Tuesday from A-plus to AA-minus, maintaining the outlook as negative. The Bengaluru-based ratings agency noted that the rating revision is on account of deterioration in the company’s subscriber base and market share, significant net losses along with a cash loss in financial year 2018-2019 and considerable repayment obligations (including deferred spectrum payments) falling due over the medium term.
The rating further continues to remain constrained on account of high debt, intense competitive pressures in the sector and the company’s susceptibility to regulatory and technological risks associated with the sector. The outlook for VIL has been kept as negative as the ratings agency believes that no significant improvement is likely to happen in the company’s business risk profile over the medium term.
Brickwork noted that the company has successfully raised equity amounting to Rs 25,000 crore through rights issue, which has improved the current liquidity position as well as the gearing. However, the current liquidity would be sufficient for the company’s projected debt and capital obligations for a period of 1.5-2 years and VIL will have to show improved profitability and cash flows and may have to go for another round of fundraising to meet the requirements after that.
“The company’s debt obligations (including spectrum payment obligations) for FY20 amount to about Rs 10,000 crore (excluding interest) and the company has planned capital investments of around Rs 17,000 crore for FY20. While the current liquidity is sufficient to manage VIL’s debt and capital commitments for the near term, it may have to go for another round of fundraising to manage its requirements in the long term,” the ratings agency said.
However, post the rights issue, the cash balance has improved to Rs 23,445 crore as on May 31, 2019. In addition to this, VIL is likely to receive about Rs 6,000 crore from the sale of stake in Indus Towers during second half of FY20 and is also planning to monetise its 158,000 km of intracity and intercity fibre network. The company has working capital limits amounting to Rs 812 crore with low utilisation of the said limits at less than 15% as on March 31, 2019 and the same provides liquidity cushion to a certain extent.