Vodafone Idea may set aside ₹5,000 crore yearly for AGR payments as priority funding

Mumbai: Vodafone Idea is likely to provision more than ₹5,000 crore annually as ‘priority funding’ to service its statutory dues based on adjusted gross revenue (AGR), even as the top management braces for the challenge in attracting investors in a company facing a dwindling cash position and weak operational metrics."Payable AGR dues have to be planned and therefore those funds have to be first set aside. The biggest worry about fundraising is the ability to convince investors on the RoI (return on investment)," said a close adviser to the Aditya Birla Group (ABG).Kumar Mangalam Birla’s ABG is a co-parent of Vodafone Idea, along with British telecom major Vodafone Group. The telecom operator has to pay ₹50,400 crore to the government as its balance AGR dues, which it can pay over 10 years as per a recent Supreme Court order. Analysts say the carrier’s outgo towards AGR dues could be over ₹7,000 crore annually, including interest. 78050856The adviser added that the company, with ₹1.7 lakh crore of debt including the statutory dues, was trying to get its finances under control to plan ahead. It is seeking to raise up to ₹25,000 crore through a mix of debt and equity.Vodafone Idea did not respond to ET's queries.At a recent media briefing, chief executive Ravinder Takkar said ₹25,000 crore was sufficient for the telco to execute its business plan aimed at turning around its operations and regain market share. He also described the Supreme Court’s AGR ruling as a “good outcome”, with the first instalment of the payment due only in March 2022.People in the know said the telco had received interest from potential investors, including global private equity firms. Names of potential investors being reported in the media include US retail major Amazon, PE firms Blackstone and Apollo Global, and US telecom company Verizon.But convincing investors to put in the money may be a tough task, said the ABG group official as well as industry executives, given the ground Vodafone Idea has lost to rivals Reliance Jio and Bharti Airtel. In fact, that is the reason Vodafone Idea is also considering credit enhancement to provide additional comfort to global investors, as plain vanilla debt offerings may not attract interest, ET reported on September 7."The performance on the ground by VIL (Vodafone Idea Ltd) and the might of its competitor (Reliance Jio) are issues that possible investors are aware of," one of the industry executives said."Why will a lender give you money when you are not generating sufficient cash flow? They will approach all big PE players but getting them to take an interest will be challenging," said a senior telecom analyst based overseas.

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