Vodafone Idea debt: A look at how the Bank would impact the Rs. 1.8 lakh crore!
Vodafone Idea Debt is something that everyone is aware of. Vodafone Idea (Vi), which is heavily in debt, may be able to reduce its debt if it agrees to convert it into equity. A telecommunications firm does not have the cash flow to repay its debt comfortably while expanding its network at the same time.
The telco’s promoters have also confirmed to analysts that they do not intend to give the firm any more capital. Since Vi has a negative cash flow, and it is losing subscribers, lacks government support, and its promoters are no longer backing the company, we don’t have much we can do at the moment.
Vodafone Idea Debt Report
As per a Nomura report, the largest exposure to the firm is State Bank of India, although IDFC First Bank and YES Bank have relatively large exposures in terms of materiality.
Telco Vodafone Idea, battered and bruised, sees no light as its survival is uncertain as it is hammered, battered, and bruised. Kumar Mangalam, chairman of Aditya Birla Group, offered his stake in VIL to the government or another entity as a means of keeping the company afloat recently.
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CEO Nick Read earlier announced that Vodafone Idea (Vi) would not receive new equity funding.
By March 31, 2021, Vodafone Idea is likely to have a debt of about Rs 1.8 lakh crore. Large exposure to the company is held by eight large banks, including SBI. The three banks with the lowest percentage to book are IDFC First Bank, YES Bank, and IndusInd Bank. Around five percent of SBI’s loan book is exposed to Vodafone Idea, whereas around three percent of IDFC First Bank’s book involves Vodafone Idea.
The solution to Debt: Converting Debt to Equity
Because their exposure is not very high as a percentage of their books, larger banks may not have to worry much. In addition, most banks had begun preparing for potential losses from VI. It’s been a while since banks prepared for this. However, smaller lenders may not be able to offer that.
State Bank of India is one of the firm’s largest exposed banks on the basis of a Nomura research report, but IDFC First Bank and YES Bank are also very large exposures on the basis of materiality.
The face of Banks in Vodafone Idea Debt
The IndusInd Bank has a funded exposure of about Rs 1,000 crore, and the remainder is unfinanced. For two years now, investors have been concerned about VI risks. Under-investment grade banks are well known. The supports from the banks can be useful for curbing the Vodafone Idea Debt.
Punjab National Bank MD, S S Mallikarjuna Rao said the recent developments were concerning for banks as they relate to the AGR issues affecting the telecom companies. In spite of this, Rao said PNB’s exposure to VIL is not very high and therefore won’t have any bearing on its balance sheet.
Rao, referring to KM Birla’s announcement yesterday that he would hand over his stake in the company to the government or to any other entity, said, “We will definitely speak to other bankers to see what our options are going forward.”.
By March 31, 2021, VIL had a gross debt of Rs 1,80,310 crore, net of lease obligations. Against the outstanding exposure of Rs 3,244 crore (funded and non-funded) of IDFC First Bank, there is a provision of 15 percent (Rs 487 crore). It is time to conclude about the Vodafone Idea debt, more details would be available soon after the decision is finalized.
In its investor presentation, the lender described the account as “one large telecom account,” adding that the account is current and has no overdue as of June 30, 2021.