Converting the debt of struggling telecom player Vodafone Idea Ltd (VIL) into equity could be an option to exit the crisis, lenders led by the State Bank of India (SBI) have suggested to the Telecommunications Department. (Dowry).
The DoT called senior bank officials on Friday to discuss the stress in the telecommunications industry resulting from the Supreme Court’s order last month on Adjusted Gross Income (AGR) contributions payable by telecommunications majors, including Vodafone Idea and Bharti Airtel, sources said. .
The Supreme Court has granted 10 years to telecommunications service providers struggling to pay Rs 93,520 crore in AGR-related dues to settle their debt to the government.
The bankers also told senior DoT officials that converting VIL’s debt to equity was an option but not sustainable, sources said, adding that since VIL had not yet defaulted on its debts, they cannot take any action at this time.
In an effort to keep a business going, banks have used the option of converting debt to equity in many stressful cases in the past.
Injection of capital by developers is the best option in the given scenario, sources quoted bankers said.
UK company Vodafone has a 45 percent stake while Aditya Birla Group has a 27 percent stake in VIL.
Lenders, both public and private, envision a loss of Rs 1.8 lakh crore in case VIL collapses. Much of the lending to the lender is in the form of collateral with public sector banks carving out the lion’s share of the debt.
Among private sector lenders, Yes Bank and IDFC First Bank could be the most affected. As a precursor, some private lenders with funded exposure have already started to build up provisions.
For example, IDFC First Bank marked VIL’s account as underlined and made provisions of 15 percent (Rs 487 crore) against the outstanding amount of Rs 3,244 crore (funded and unfunded).
“This provision translates into 24% of the exposure financed on this account. The said account is up to date and has no outstanding payments as at June 30, 2021”, the lender said in its presentation to investors for the first quarter of the fiscal year. 22, referring to the account. as “one big telecom account”.
According to official data, VIL had an AGR liability of Rs 58,254 crore on which the company paid Rs 7,854.37 crore and Rs 50,399.63 crore is unpaid.
The gross debt of the company, excluding lease debts, was Rs 1,80,310 crore as of March 31, 2021. The amount included spectrum deferred payment obligations of Rs 96,270 crore and a debt from banks and financial institutions Rs 23,080 crore, excluding AGR liabilities. .
In a context of such significant liabilities, the promoter Vodafone (45 percent of the capital) and Aditya Birla Group (27 percent of the capital) expressed their inability to provide additional capital.
Writing a letter to Cabinet Secretary Rajiv Gauba in June, Aditya Birla Group Chairman Kumar Mangalam Birla said investors were unwilling to invest in the company in the absence of clarity on AGR’s accountability, d ‘an adequate moratorium on spectrum payments and, above all, a floor price regime above the cost of the service.
“It is with a sense of duty to the 27 crore Indians connected by VIL, I am more than willing to cede my stake in the company to any public sector entity / government / national financial entity or any other than the government can consider it worthy to keep the business going, ”Birla said in the letter.
Birla stepped down as non-executive chairman of the struggling telecommunications giant last week.
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