Tag: Aditya Birla Group

Birla is being replaced by Himanshu Kapania, currently a non-executive director and a former managing director of the erstwhile Idea Cellular before its merger with Vodafone India.

“The Board of Directors of Vodafone Idea Limited, at its meeting held today, have accepted the request of Mr. Kumar Mangalam Birla to step down as Non-Executive Director and Non-Executive Chairman of the Board with effect from close of business hours on 4th August, 2021,” the company said in a notice to stock exchanges on Wednesday.

UK’s Vodafone Group, the co-parent of Vi with a 44.39% stake, declined to comment.

Birla’s announcement – which came after market hours – comes less than two months after he wrote to the government, offering to hand over the group’s 27.66 % stake in Vi to any public sector or domestic financial entity who could keep the company afloat. He had also asserted that without immediate government support, the telco would be driven to an irretrievable point of collapse.

The Vodafone Group didn’t comment on Birla’s letter. But its CEO Nick Read on July 23 – over a month and a half after Birla’s June 7 letter – reiterated UK major’s stance that it won’t infuse any more equity in its Indian JV.

The government hasn’t responded to Birla’s letter. Officials though say that the Centre is preparing a relief package for the telecom sector, which would also benefit Vi. The package could include allowing surrender of spectrum, reduction of bank guarantees, phasing out or reducing levies such as licence fees and spectrum usage charges and prospectively redefine adjusted gross revenue (AGR) to exclude non-telecom items.

Vi’s stock crashed 20% to its 52-week low on Wednesday to Rs 5.94 before ending 18.5% down at Rs 6.03 as investors dumped the company, fearing it is headed for a default and bankruptcy, said market experts. The shares lost Rs 3,936.75 crore in value, a day after losing Rs2,443 crore when the scrip ended 10.3% lower. Contents of the letter were made public on Monday.

Market watchers said the planned relief package won’t address the immediate cash needs of the telco, which is staring at a potential $3.1 billion (Rs 23,500 crore) shortfall in cash flows in FY23, as per Kotak Securities. Vi’s cash balance at March end was Rs 350 crore and its efforts at raising Rs25,000 crore for the last 10 months hasn’t been successful so far.

Birla had taken over as non-executive chairman of Vodafone Idea in August 2018 upon the closure of a $23-billion merger between Idea Cellular and Vodafone India, the telecom unit of Vodafone Group. The merged entity became the country’s largest telco by revenue market share and subscriber share.

But since then, as the two companies worked to integrate the two large telcos, Vodafone Idea rapidly lost both revenue and subscriber market share to rivals Reliance Jio and Bharti Airtel.

Its debt ballooned to Rs1.8 lakh crore in the January-March quarter as it borrowed to buy spectrum and invest in its network, at a time revenue was falling sharply, leading to dwindling cash flows and heavy losses. Vi has never reported a quarterly profit since the merger. Its net loss in the January-March quarter was Rs 6,985.1 crore.

The telco was pushed to the brink after the Supreme Court ruled in September 2019 to widen the definition of AGR to include non-telecom items and left Vi with a statutory bill of over Rs58,000 crore. It has paid Rs7854 crore so far, and all its attempts to reduce the AGR bill by legal means has come to nought.

In his letter, Birla said that over the last year, the telco has made all efforts to improve the operational efficiency of the company through prudent capital spending, manpower restructuring, and other cost cutting steps.

“Despite all that, the financial condition (particularly the liquidity position) of the company has sharply deteriorated,” he said.

Birla had also sought positive actions on long standing requests such as clarity on AGR liability, adequate moratorium on spectrum payments, and a floor price regime for investors to have confidence in the sector to invest in Vi. The letter predated last month’s Supreme Court order which dismissed the plea of Vodafone Idea and other telcos to permit rectification of ‘arithmetical errors’ in the computation of AGR dues.

He added that without backing from the government on the three major issues by July 2021, VIL’s financial situation will drive its operations to an “irretrievable point of collapse”.