Vodafone-Idea believes govt won’t be in conflict with Supreme Court on telco relief: Brokerages

Having posted India’s biggest ever quarterly loss after being forced to provision for statutory dues, Vodafone Idea believes the government will not be in conflict with the Supreme Court if it does provide any relief for payments ordered by the apex court, brokerages have said.Vodafone Idea Ltd (VIL) faces a liability of Rs 44,150 crore after the Supreme Court ordered that non-telecom revenues should be included in the adjusted gross revenue (AGR) of mobile phone service providers for calculation of statutory dues such as licence fee and spectrum usage charge.”Though it is negotiating with the government for relief measures, (we) would wait to see how much government aid (particularly in reducing AGR liability) is provided to revive the sector and VIL in particular,” ICICI Securities said in an equity research report on the company. “In any case, VIL may be required to infuse huge equity for making it going.”SBICap Securities said VIL reported a net loss of Rs 50,921 crore on the back of provisioning for the liability arising from the Supreme Court ruling on the AGR issue.”The company has provided for liabilities of Rs 27,600 crore for license fees and Rs 16,500 crore for spectrum usage charges.”The company has noted that its ability to continue as a going concern is dependent on obtaining relief from the government, and a positive outcome of the proposed legal remedy,” it said.
The ruling, it said, poses significant survival concerns for VIL with an exhausted balance sheet as FY20 net debt to EBITDA ratio is at 31x, and accounting for dues being funded via debt would raise it to 38x.“Given this situation, raising equity or debt remains extremely tricky, in our view,” it said. “The ability to invest in networks, which has been the single largest reason for the company losing subscribers, is further likely to take a back seat and subscriber losses may continue in our view.”