CARE upgrades outlook on Vodafone Idea to positive; reaffirms ratings

CARE Ratings on Thursday revised outlook on Vodafone Idea (Vi) bank facilities to "positive" from "stable".  It also reaffirmed "B+" rating for debentures and long-term loans. 

The outlook upgrade has been done on the expectation of equity infusion and raising of long-term debt from the banks and financial institutions or funds. 

This follows the Centre accepting the deferment of spectrum instalments and AGR dues.

ARE Ratings today revised outlook on Vodafone Idea Ltd’s (VIL) bank facilities to "positive" from "Stable".  It also reaffirmed "B+" rating for debentures and long-term loans.

It will provide liquidity in the company to address the existing strain in liquidity due to cash-flow mismatch and implement 5G to augment the subscriber base and improve revenue.

CARE Ratings will closely monitor the developments and the outlook may be revised to ‘Stable’ if there is delay in timely infusion of equity or unable to raise long term debt from banks/FI’s.

The reaffirmation of the ratings factors in the established promoter groups (Aditya Birla Group and Vodafone Group Plc), experienced management team, and the pan-India telecom presence with high brand recognition. The outlook for the Indian telecommunications industry is stable.  Furthermore, the ratings take cognisance of fund infusion by promoters of around Rs 5,000 crore.

The ratings, however, remains underpinned by VIL’s deteriorated financial risk profile, wherein, the tangible net-worth has eroded, its constantly declining subscriber base and delay in raising funds from financial institutions and investors.  Also, the ratings take into account the company’s exposure to the inherent regulatory risks of the industry and the intensely competitive business environment.

Going forward, the ability of the company to raise funds to address the existing strain in liquidity and undertake capex to implement 5G to augment the subscriber base & consequent improvement in revenues will be a key rating monitorable, it added.