Vodafone Idea on the Brink: Govt Shuts Door on More Equity Conversions

Amid concerns over its long-term viability, the Indian government is presently addressing Vodafone Idea's (Vi) financial difficulties and contemplating relief measures.

Vi might not be able to fulfil obligations after 2028–2029 if payment terms are not even extended to adjusted gross revenue (AGR) dues.

Although measures like extending the AGR payment period from six to twenty years are being discussed, government officials have warned that they may not guarantee Vi's viability after 2028–2029.

According to the Department of Telecommunications, Vi won't have money for its FY27 obligations if it is required to pay the entire INR 18,064 crore instalment by the end of FY26.

Vi Navigating Through Bundle of Challenges

The government became the largest shareholder with a 48.99% stake in the company in March after converting INR 36,950 crore in spectrum arrears into stock at Vi's request.

Spectrum auctions held prior to 2021 were connected to these arrears. Vi's financial future is still questionable in spite of this conversion. Vi has provided estimates through the Supreme Court's 2030–31 deadline for the payment of AGR dues.

A four-year moratorium on AGR and spectrum dues from FY22 had already been granted by the government. Vi is now required to pay out all of the debt in six instalments beginning this fiscal year.

Vi's January–March net loss of INR 7,166 crore was more than its October–December 2024 loss of INR 6,609 crore. It is currently negotiating with lenders after its board approved raising an extra INR 20,000 crore through loan or equity.

According to SR Batliboi & Associates, the group's capacity to function as a going concern depends on the DoT's backing over the AGR issue. They also emphasised Vi's difficulty producing the cash flows required to pay down or refinance obligations as they fall due.

Vi Needs Immediate Bailout by Securing Loan

Vi can pay its debts this fiscal year, but starting in FY27, it won't be feasible without obtaining more than INR 25,000 crore in loans from the bank and financial institution loans, according to a telecom industry analyst.

Motilal Oswal, a broking firm, cautioned that Vi may have a yearly liquidity shortage of INR 20,000 crore if AGR dues are not relieved or if debt fundraising activities are unsuccessful.

Vi has INR 9,930 crore in cash and bank balance at the end of March. In discussions with the DoT, the business had acknowledged that it would not be able to fulfil post-moratorium payment schedules.

Before a portion of the debt was turned into equity, the estimated payment for FY26 was more than INR 30,500 crore. The current talks show how difficult it is to guarantee Vodafone Idea's existence in the face of growing financial strains and few alternatives for effective relief or obligation restructuring.