Will Voda Idea convert interest dues into equity?

Debt-ridden telecom operator Vodafone Idea is evaluating the option of converting interest dues arising out of the deferment of statutory payments into equity, a senior company official said on Monday.

The company is also in talks with banks and investors for raising funds and part of the proceeds is likely to be utilised towards meeting obligations related to debt maturing this fiscal, Vodafone Idea Limited (VIL) chief financial officer Akshay Moondra said during the company's earning call.

VIL MD and CEO Ravinder Takkar said the company expects to conclude fund raising plan by the end of the current financial year.

VIL board in September 2020 had approved raising up to Rs 25,000 crore but the company could not go ahead with its fund-raising plans.

Takkar said that the government reform package is a significant positive development and alleviates several investors' concerns.

"We believe there will be renewed interest from investors.

"We are also in the process of updating our business plan.

"Once it is finalised we will make suitable disclosures on fund raising.

"We expect to conclude this exercise during this fiscal year," he said.

The government has given the option to defer all their dues payment for spectrum and Adjusted Gross Revenue (AGR) by four years to provide debt-ridden telecom companies an opportunity to improve their cash flows and invest in business.

"For the AGR dues, we are in discussion with the DoT (Department of Telecom) to determine the final amount in line with the Supreme Court judgement.

"Further, there is an option to convert such deferment into equity.

"We are evaluating this and we will be reverting on our decision on upfront conversion of interest into equity by the deadline of January 12, 2022," Moondra said.

According to him, the company is also in discussions with banks and investors for raising both debt and equity.

"These discussions also include some kind of arrangement of funding to be able to meet immediate maturities of debt which are coming up in the remaining quarter of FY'22."

Last week, VIL reported a narrowing of consolidated loss to Rs 7,144.6 crore for the September quarter on account of an increase in mobile services tariff and cost optimisation.

The company had posted a loss of Rs 7,218.2 crore in the corresponding period of the previous financial year.

In the latest September quarter, its consolidated revenue declined about 13 per cent to Rs 9,406.4 crore.

The same was at Rs 10,791.2 crore in the year-ago period.

VIL's total gross debt, excluding lease liabilities and including interest accrued but not due, as of September 30, 2021 stood at Rs 1,94,780 crore.

The amount comprises deferred spectrum payment obligations of Rs 1,08,610 crore, AGR liability of Rs 63,400 crore that are due to the government and debt from banks and financial institutions of Rs 22,770 crore.

Takkar said the company has started working on raising mobile tariffs and it is expected to be in place very soon.

"Some activity on tariff hikes has started to happen. Tariff hikes which are the next important step will also take (place) soon.

"For us, particularly as a company, we will not shy away from raising tariffs," Takkar said.

During the September quarter, VIL increased the entry level prepaid pricing plan from Rs 49 to Rs 79 in a phased manner as well as hiked the tariffs for some postpaid plans.

Takkar said that VIL will soon launch a music streaming service and ramp up gaming, education, skilling and health segment offerings to monetise digital traffic on the company's network.

Photograph: Hitesh Harisinghani/Rediff.com