Vodafone Idea will not survive without the help of the government

Vodafone Idea (VIL) was banking on a favourable judgment from the Supreme court on the calculation of its AGR dues, which would have reduced its cash shortfall for running the business in FY22. But the expectation by analysts that its AGR could go down by half (from Rs 8,000 crore per annum) is now history, with the Supreme court today rejecting its plea and raising the spectre on whether it can survive as going concern.

“Vi’s survival options appear to be rapidly disappearing after today’s adverse verdict in the AGR (adjusted gross revenues) case, which is likely to make its long overdue fundraise an even more daunting affair,” Mayuresh Joshi, head of equity research at Indian unit of US equity research firm William O’ Neil & Co, told ET.

Meanwhile, the company’s debt is piling up. As the auditors stated in the March quarter result, if Vodafone Idea’s dues are not cleared on time it will be a ‘material uncertainty’, which will hinder the company’s existence.

Analysts said Vi, more than ever before, is now dependent on relief from the government on payment timelines, as in extension of the moratorium on spectrum payment and/or any legislative action to extend AGR payment timelines, though the latter appears unlikely.

VI has already requested the Department of Telecommunications (DoT) to give till April 2023 to pay its Rs 8,292 crore dues related to spectrum purchased in auctions. The company owes DoT more than Rs 1.5 lakh crore by way of AGR and deferred spectrum payment dues, and the government would be the biggest loser if the struggling telco goes bankrupt, experts said.

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