VIL still needs additional liquidity to survive, says Vodafone Group

Vodafone Group owns 32.29% stake in VIL while Aditya Birla group owns 18.07% stake in VIL after the government picked up 33% stake in the loss-making company

While pegging the value of its stake in Vodafone Idea (VIL) at zero, London-based Vodafone Group said the Indian company still needs additional liquidity to survive.

In its results for March quarter, Vodafone PLC said in February, VIL issued shares to the Government of India equivalent to Rs 16,100 crore (€1.8 billion), representing the net present value of interest accrued on both deferred spectrum auction instalments and AGR dues, per the relief package announced in September 2021 by the government.

"VIL remains in need of additional liquidity support from its lenders and intends to raise additional funding. There are significant uncertainties in relation to VIL’s ability to make payments in relation to any remaining liabilities covered by the mechanism and no further cash payments are considered probable from the Vodafone Group as at 31 March 31, 2023," it said in a statement.

Vodafone Group owns 32.29 per cent stake in VIL while Aditya Birla group owns 18.07 per cent stake in VIL after the government picked up 33 per cent stake in the loss-making company. On Indus Towers, Vodafone group said VIL’s ability to satisfy certain payment obligations under its Master Services Agreements with Indus Towers is uncertain and depends on a number of factors including its ability to raise additional funding. Under the terms of the Indus and Bharti Infratel merger in November 2020, a security package was agreed for the benefit of the newly created merged entity, Indus Towers, which could be invoked in the event that VIL was unable to make MSA payments. 

The security package included a cash prepayment of Rs 2,400 crore (€279 million) by VIL to Indus Towers in respect of its undisputed payment obligations, due under the MSAs after the merger closing. The prepayment was fully utilised during the year to 31 March 2022.

The UK company said a primary pledge over 190.7 million shares owned by Vodafone Group in Indus Towers having a value of Rs 4,700 crore (€544 million) as at March 2021. These pledged shares were sold by the Group in the year ended 31 March 2022 and the Group invested Rs 3,370 crore (€393 million) of the proceeds by subscribing to newly issued VIL equity, which VIL immediately used to partially settle outstanding MSA obligations to Indus Towers resulting in an equivalent partial release of the primary pledge.

On February 14 2023, a similar transaction was undertaken with Ra 440 crore (€49 million) remaining from the sale of the primary pledge shares, fully releasing the pledge.