Banks ‘talking to Vodafone Idea’ about debt-to-equity rescue

Banks ‘talking to Vodafone Idea’ about debt-to-equity rescue

Vodafone Idea with Kumar Mangalam Birla.jpg

Indian banks are in discussions about converting Vodafone Idea’s debts into equity, effectively taking over one of the country’s three main mobile operators.

UK-based Vodafone has a 45% per cent stake in Vodafone Idea, which now operates as Vi, but has already written off the investment. Aditya Birla Group, an Indian industrial group, owns 27% but the chairman, Kumar Mangalam Birla (pictured), has offered to hand over the whole stake to the government.

Birla resigned last week as executive chairman of Vi.

Vi’s market cap today was 191.67 billion rupees (US$1.46 billion) but the company owes 504 billion rupees to the government alone, in back taxes related to adjusted gross revenue (AGR).

Total debt, according to one report, is 1,803 billion rupees ($24 billion). According to reports from India, the State Bank of India (SBI), Bank of Baroda, Yes Bank and IDFC First Bank have been involved in discussions about banks’ exposure to the debt.

Business Standard reported this morning that IDFC First Bank has marked Vi’s account as stressed. It has exposure of 32.4 billion rupees ($436 million) and has made provisions of 15% of the total.

India’s Supreme Court last month gave Vi as well as Bharti Airtel 10 years to pay their AGR dues. in annual instalments. 

Reports say that India’s Department of Telecommunications (DoT) called the discussions with banks about Vi’s state and to talk about stress in other parts of the telecoms sector, which has seen Reliance Communications (RCom) go into bankruptcy and its sister company Global Cloud Xchange (GCX) taken over by US lenders. Other companies merged with Bharti Airtel or exited the business altogether.

Reliance Jio, whose creation in 2016 of a modern nationwide 4G network led to the collapse of many former competitors, has a 35.3% market share. Bharti Airtel has 29.6% and Vi has 24.6%. Reliance Jio is unconnected with Reliance Communications.



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