Tag: K M Birla

Banks to discuss next course of action on Vodafone Idea, BFSI News, ET BFSI

Banking & Finance

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NEW DELHI: Lenders to Vodafone Idea (VIL) are expected to hold talks to decide on the future course of action with regard to their exposure to the debt-laden telecom player which is struggling to stay afloat.

This comes in the wake of Aditya Birla Group chairman Kumar Mangalam Birla offering to hand over his stake in VIL to the government or any other entity so that the company remains functional.

Meanwhile, Birla on Wednesday stepped down as non-executive director and non-executive chairman of Vodafone Idea.

S S Mallikarjuna Rao, MD and CEO of Punjab National Bank, on Tuesday said the developments in the last few days were areas of concern for the banking industry, referring the AGR-related issues for the telecom players.

Rao, however, said PNB‘s exposure is not very high in VIL and it is not going to impact its balance sheet.

“However, we will be definitely discussing with other bankers to see what kind of action we need to take going forward considering the statement of K M Birla only yesterday,” Rao said, referring to the billionaire businessman’s offer to hand over his stake in VIL to the government or any other entity.

The Supreme Court has dismissed applications by telcos for recalculation of AGR-related dues.

According to official data, VIL had an adjusted gross revenue (AGR) liability of Rs 58,254 crore, out of which the company has paid Rs 7,854.37 crore and Rs 50,399.63 crore is outstanding.

The apex court, in an order passed in September last year, had asked the telecom players to settle their AGR related dues worth Rs 93,520 crore towards the government over a period of 10 years.

VIL’s gross debt, excluding lease liabilities, stood at Rs 1,80,310 crore as of March 31, 2021.

IDFC First Bank has marked the account of VIL as stressed and has made provisions of 15 per cent (Rs 487 crore) against the outstanding exposure of Rs 3,244 crore (funded and non-funded).

“This provision translates to 24 per cent of the funded exposure on this account. The said account is current and has no overdues as of June 30, 2021,” the lender said in its Q1FY22 investor presentation, referring to the account as “one large telecom account”.

Writing a letter to Cabinet Secretary Rajiv Gauba in June, Birla, who holds around 27 per cent stake in VIL, said investors are not willing to invest in the company in the absence of clarity on AGR liability, adequate moratorium on spectrum payments and most importantly floor pricing regime being above the cost of service.

“It is with a sense of duty towards the 27 crore Indians connected by VIL, I am more than willing to hand over my stake in the company to any entity- public sector/government /domestic financial entity or any other that the government may consider worthy of keeping the company as a going concern,” Birla said in the letter.

Among the other players, the AGR liability of Bharti Airtel is Rs 43,980 crore, Tata group Rs 16,798 crore, BSNL Rs 5,835.85 crore and MTNL Rs 4,352.09 crore.

Bharti Airtel has paid the government Rs 18,004 crore, Tatas Rs 4,197 crore and Reliance Jio has cleared its entire dues of Rs 194.79 crore.

Anil Ambani-owned Reliance Communications owes Rs 25,194.58 crore, Aircel Rs 12,389 crore and Videocon Telecommunications Rs 1,376 crore. However, these companies are under liquidation process.

Companies like Loop Telecom, Etisalat DB and S Tel, which jointly owe the government Rs 604 crore, have shut down their India operations.



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Vodafone Idea lenders can potentially lose Rs 1.8 lakh cr if telco collapses, BFSI News, ET BFSI

Banking & Finance

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A fresh eruption in Vodafone Idea financial woes with the promoter K M Birla offering to hand over his equity to the government has worried the telco’s lenders who stare at a loss of Rs 1.8 lakh crore if the company collapses. “I am more than willing to hand over my stake in the company to any entity- public sector/government /domestic financial entity or any other that the government may consider worthy of keeping the company as a going concern,” Birla said in the letter.

A large part of the loans to the lender is in the form of guarantees with public sector banks having a lion’s share of the debt. Some private lenders with a funded exposure have already started making provisions.

The debt

According to official data, VIL had an adjusted gross revenue (AGR) liability of Rs 58,254 crore out of which the company has paid Rs 7,854.37 crore and Rs 50,399.63 crore is outstanding.

VIL’s gross debt, excluding lease liabilities, stood at Rs 1,80,310 crore as of March 31, 2021. The amount included deferred spectrum payment obligations of Rs 96,270 crore and debt from banks and financial institutions of Rs 23,080 crore apart from the AGR liability.

The scenario

If fails to repay its dues to the government and these guarantees are invoked, it would immediately turn into debt and would soon be classified as a non-performing asset.

The hit on PSU banks will not be as large as their exposure because in recent years lenders have been demanding a substantially higher cash margin for their guarantees. IDBI Bank is understood to have up to 40% margins for the guarantees it has extended. But even then it will be large enough to wipe out profits for many.

What ahead?

The insolvency process can work only when there are buyers. In the case of Vodafone, the Rs 53,000-crore AGR (adjusted gross revenue) dues to the Centre are a deterrent. This is despite Birla being willing to write down his entire equity. The government dues cannot be avoided as the Centre cannot make an exception for one company. Even in insolvency cases, the department of telecom has claimed its dues to be that of a financial creditor although there have been attempts to mark them as operational creditors.

The uncertainty over DoT’s claims, which is already being experienced by lenders in the Reliance Communications

insolvency case, would make telecom resolutions a challenge. Lenders do not want to risk insolvency as this

would result in the exit of customers which was the case with RCom.

With the the company’s debt obligations being equal to 1.5% of the banking sector’s credit, experts have suggested the debt be converted into equity shares, the company be nationalised and perhaps merged with BSNL and MTNL. However, it seems highly unlikely the government will nationalise the company. On balance, they would reckon it is better to give up the revenues than act politically incorrectly in bailing out a private sector player—one with a foreign promoter.



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