Vodafone Idea rejigs loans as finances weaken

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Published: August 23, 2019 6:13:39 AM

Analysts believe the company’s strategy is not up to the mark. Kotak Institutional Equities said in a July 29 report, “We are particularly disappointed with the pace of capex deployment by VIL.

Vodafone Idea, VIL, industry news, loan, Kotak , Vodafone idea share, Vodafone newsThe breach in loan covenants was the result of a deterioration in the company’s financial ratios.

By Shubhra Tandon & Mitali Salian

Vodafone Idea (VIL) has said it has re-classified loans worth Rs 10,280 crore. “The company has classified Rs 102,062 million from non-current borrowings to current maturities of long term debt for not meeting certain covenant clauses for specified financial ratios as at 31st March, 2019, waivers for which are awaited as on the reporting date,” a spokesperson for the telco said. Bankers explained to FE that following a breach of the covenants, lenders typically ask for the loan to be paid earlier than on the original repayment date.

The breach in loan covenants was the result of a deterioration in the company’s financial ratios. The annual report for FY2019 says: “The company has not met certain financial ratios for some of these arrangements, the gross outstanding amount for which as at March 31, 2019 was at Rs 158,443 million. Waivers for loans of Rs 5,5596 million has been received as of reporting date and balance Rs 102,802 million has been reclassified from non-current borrowings to current maturities of long-term debt.” The company is confident of getting waivers on the remaining amount too, the company said.

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Responding to queries sent by FE, the company’s spokesperson said: “We have recently raised Rs 250 billion through rights issue and have option to monetise our 11.15% stake in Indus, on conclusion of Infratel–Indus merger, which is expected soon. We are also working on monetising our fibre assets. All this coupled with internal cash generation, provided sufficient liquidity to follow our strategy.”

Analysts believe the company’s strategy is not up to the mark. Kotak Institutional Equities said in a July 29 report, “We are particularly disappointed with the pace of capex deployment by VIL. The company has to find a way to step up network expansion pace while ensuring seamless integration at the same time. VIL’s LTE network lags both R-Jio and Bharti on coverage as well as capacity and time is of utmost essence as VIL can ill afford to let the gap expand further”.

Meanwhile,within a year of taking over as the CEO of Vodafone Idea, Balesh Sharma resigned from his position on Monday and his place was taken by Ravinder Takkar, who is MD and CEO.

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