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Ind-Ra Downgrades Vodafone Idea, NCDs To IND B

Ind-Ra said it believes Vodafone Idea does not have the ability to pay the dues, given the lack of clarity on promoter equity infusion, severe erosion in refinancing flexibility and insufficient cash balance

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India Ratings and Research (Ind-Ra) on Tuesday downgraded Vodafone Idea's long-term issuer rating to B from BBB minus while maintaining it on rating watch negative (RWN).

The downgrade reflects severe stress on Vodafone Idea's near-term liquidity post the Supreme Court's ruling on February 14 which directed telecom companies to pay the adjusted gross revenue (AGR)-related liabilities to the government of India by March 17. Subsequently, the Department of Telecommunications (DoT) sent demand notices towards AGR liabilities to telcos.

Ind-Ra said it believes Vodafone Idea does not have the ability to pay the dues, given the lack of clarity on promoter equity infusion, severe erosion in refinancing flexibility and insufficient cash balance (Rs 12,500 crore as of December 2019).

The ruling has also elevated the risk of an acceleration in the payment of financial liabilities. Also, said Ind-Ra, even if Vodafone Idea pays the principal amount for AGR dues to comply partially with the SC order, the current cash and equivalent and future cash flows will prove insufficient to meet the financial obligations.

The RWN reflects significant uncertainties over the outcome of modification application filed by telcos, the quantum of the AGR-related liabilities and Vodafone Idea's ability to pay the AGR dues.
It also reflects uncertainties over other liquidity events such as the possible risk of accelerated payment of financial liabilities and likely delays in asset monetisation.

Since January 2018, about Rs 48,300 crore has been infused in the erstwhile Idea Cellular Limited, erstwhile Vodafone India Limited and Vodafone Idea through capital infusions and asset sales.
However, the continuation of support from Aditya Birla Group remains contingent on financial viability of the business, which appears to be challenging based on the prevailing scenario.

 (ANI)


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