Vodafone Idea Chairman Kumar Mangalam Birla and the company’s managing director and chief executive officer Ravinder Takkar met Department of Telecommunications (DoT) Secretary Anshu Prakash for over an hour on Tuesday. Both Prakash and Birla , however, refused to comment on what was discussed, with the latter saying he “cannot say anything at the moment”. Birla’s meeting with Prakash comes after his meeting with Telecom Minister Ravi Shankar Prasad Friday, according to sources. Takkar, meanwhile, is learnt to have paid a second visit to Prakash later during the day.
Vodafone Idea, which faces an adjusted gross revenue (AGR) payout of at least Rs 53,000 crore, is under the lens of rating agencies that believe it does not have the ability to pay the required AGR dues by March 17, 2020. Talks of the company’s bank guarantees being encashed by the DoT, in case it fails to make the payments, have also been doing the rounds.
On Tuesday, the telco’s long-term rating was downgraded by India Ratings, which said it believes Vodafone Idea “does not have the ability to pay dues by 17 March 2020, given lack of clarity on promoter equity infusion, severe erosion in refinancing flexibility and insufficient cash balance”.
“Ind-Ra believes VIL (Vodafone Idea) does not have the ability to pay the dues by 17 March 2020, 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 elevated the risk of acceleration in the payment of financial liabilities,” the rating agency said in a press release.
The downgrade by India Ratings was preceded by another rating downgrade by Care Ratings, which had on Monday downgraded the long-term rating of Vodafone Idea, “taking into cognizance of the financial impact of no relief being granted” by the Supreme Court on February 14.
“Along with these, any further delay in the monetisation of its tower business housed in Indus Towers Ltd and fibre assets, are likely to put further strain on the liquidity profile of the company. The ability of VIL (Vodafone Idea) to raise funds and manage the financial liability arising out of the AGR dues remains a key monitorable,” Care Ratings had said.
On February 14, the Supreme Court, during the hearing of a modification plea moved by telecom and non-telecom companies, said if the firms did not make payments of the pending AGR dues before March 17, the managing directors and other directors of the firms would have to make personal appearance before the court. The apex court then issued show-cause notice to the companies as to why contempt of court should not be initiated against them for failing to comply with orders.
On October 24, 2019, the SC upheld the DoT’s definition of AGR and said since the licencees had agreed to the migration packages, they were liable to pay the dues, the penalty on dues, and the interest on penalty due to delay in payments. The apex court had then given the telcos three months to clear their AGR dues.
That three-month deadline ended on January 23, before which the telcos had unsuccessfully tried to persuade the DoT to give them more time to pay the dues. Having failed there, the telcos again approached the apex court seeking a review of the October 24 judgment, which was turned down.
Two days before the stipulated deadline was to end, the telcos moved the top court again, seeking to “work out feasible terms mutually with DoT” to ensure that they remained a “going concern”.
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