The British telecom carrier, which holds 32.29% in Vi, has also flagged uncertainties around the latter’s ability to meet its payment dues to Indus Towers, saying that hinges on its Indian telecom JV’s ability to close its long pending fundraise. The Aditya Birla Group holds 18.07% in the JV.
Vi shares were down 3.13% to Rs 7.12 in Wednesday morning trade on the BSE.
“Vi remains in need of additional liquidity support from its lenders and intends to raise additional funding…there are significant uncertainties in relation to Vi’s ability to make payments in relation to any remaining liabilities covered by the (payments) mechanism and no further cash payments are considered probable from the Group as at March 31, 2023,” Vodafone Group said in its earnings statement for FY23.
The British carrier, in fact, has said the carrying value of its investment in Vi is nil and the Group is recording no further share of losses in respect of Vi.
Vodafone Group added that Vi’s ability to satisfy certain payment obligations under its master services agreements (MSAs) with Indus “is uncertain” and depends on a number of factors including its ability to raise additional funding.
Vi is estimated to still owe around Rs 7,000 crore to Indus Towers, although it is reckoned to be meeting around 90-100% of its current monthly dues.Earlier this month, Indus’s senior management said the tower company is now pushing Vi to clear its past outstandings and has ruled out any further relaxation in the payment plan that was thrashed out earlier this year with its key, cash-strapped telco customer.
“Under the terms of the Indus and (erstwhile) Bharti Infratel merger in November 2020, a security package was agreed for the benefit of the newly created merged entity, Indus Towers, which could be invoked in the event that Vi was unable to make MSA payments,” Vodafone Group said.
It added that in case of non-payment of relevant MSA obligations by Vi, Indus would have recourse to any secondary pledged shares, after repayment of the bank borrowings in full, up to the value of the liability cap.
Under the agreed security package, “there is a secondary pledge over shares owned by Vodafone Group in Indus, ranking behind Vodafone’s existing lenders for the outstanding bank borrowings of €1.5 billion as at March 31, 2023 secured against Indian assets (‘the bank borrowings’), with a maximum liability cap of INR 42.5 billion (€476 million),” the UK telco said.
Vi hasn’t been able to close its long pending external fundraise and its co-promoters were widely expected to infuse around Rs 5,000 crore of fresh capital in tranches after the government converted the telco’s accrued interest towards adjusted gross revenue (AGR) arrears into equity in February 2023 and became its biggest shareholder with a 33.1% stake.
Fresh capital infusion by Vi’s promoters is vital as it’s expected to lead to third-party equity funding. That would trigger the much-needed investments in Vi’s 4G network and towards its pending 5G rollout.
ET had reported on February 15 that the Aditya Birla Group had initiated an exercise to raise funds at the promoter level for equity infusion into Vi.
