Vodafone Idea may pay Rs 1,000-2,000 crore as upfront payment of AGR dues: ICICI Securities

Vodafone Idea Ltd (VIL) might deposit Rs1000-2000 crore as a ‘reasonable’ upfront payment so as to avail of a staggered fee of adjusted gross income (AGR) dues, say analysts, who added that the Supreme Court’s observations on Thursday have added to optimism concerning the money strapped telco’s survival.

“VIL can supply funds from Vodafone Plc’s unpaid indemnity of Rs67 billion and may obtain Rs36 billion for its Indus stake on merger between Bharti Infratel and Indus,” ICICI Securities stated in a be aware. “…in our view (this amount) would satisfy the SC since the company’s balance sheet position would justify it as ‘reasonable’ payment.”

Credit Suisse estimates that with no entry to incremental debt funding, Vodafone Idea might at greatest pay Rs5000 crore of incremental dues. The telco faces over Rs58,000 crore in AGR dues comprising of license charges, spectrum utilization cost, curiosity and penalties, of which it has practically Rs7,000 crore.

It has backed a authorities proposal to unfold the stability fee over 20 years, however the high court docket Thursday stated telcos ought to make an upfront fee to avail of a staggered fee timeline.

SBICap Securities stated if the benchmark for ‘reasonable’ is Bharti Airtel, which has already paid 40% of its pending AGR dues, VIL might want to pay an extra INR 17,000 crore which is hard for the corporate given its already stretched stability sheet, with web debt of over Rs1.03 lakh crore amid falling income and widening losses.

“However, if the upfront payments are about 20-25% of overall dues, the company may have a few options to address the same,” the home stated.

Axis Capital stated that Bharti Airtel was higher positioned to make upfront fee because it had Rs 13,600 crore in money at finish of Q4FY20, it has belongings obtainable for monetization, and it’s higher positioned to boost funds from the market.

For VIL, money might be generated from Rs 1400 crore acquired in April from Vodafone Group, Rs 700 crore in tax refund, Rs 4000 crore from pending GST refund and money from sale of its stake in Bharti Infratel post-merger.

“Nevertheless, we see increasing case for continuity of VIL, as acceptance of staggered payment along with relief measures from government (floor pricing, reduction in levies, reduction in spectrum liability interest, etc.) and some steps by the company itself (recapitalization or new investors/partners) could improve its viability,” Axis Capital stated.

As per the brokerage, if the court docket accepts 20-year staggered plan for stability AGR dues, sustaining identical NPV (web current worth) with 7.5% rate of interest would end in money outgo of Rs 5040 billion and Rs 25.50 crore per 12 months for VIL and Bharti Airtel respectively.

VIL would require an 8% enhance in common income per consumer (ARPU) in FY21/FY22 to make annual funds which appears to be like manageable. “However, it is going to require 57% enchancment in ARPU by FY23 (from FY21 estimated ranges) as soon as the moratorium on spectrum funds finish. This might require introduction of flooring pricing/ tariff hike and different reduction measures from authorities.” Axis Capital stated in a report.

SBICap Securities cautioned that VIL “will still need to revisit its revival plans and overall strategy as it will still need to walk a very tight rope given the hefty regulatory dues to be paid as annual instalments, and the catch up it has to do on 4G capex.”

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