India Ratings and Research on Friday downgraded the rating of Rs 3,500 crore non-convertible debentures of Vodafone Idea Ltd. on account of liabilities related to adjusted gross revenue dues.
The NCDs were issued by erstwhile Vodafone Mobile Services.
The credit rating firm downgraded the rating by one level to 'IND BBB' from 'IND A+' and placed it in "rating watch negative" indicating a chance of further lowering of its ability to pay for the debt note.
"As per the rating rationale published on the website (of India Ratings), the downgrade is on account of crystallisation of adjusted gross revenue related liabilities, post the dismissal of the review petition by the Supreme Court," Vodafone Idea said in a stock exchange filing.
Vodafone Idea AGR dues as estimated by the Department of Telecom stands at a cumulative Rs 53,038 crore, including Rs 24,729 crore of spectrum usage charge dues and Rs 28,309 crore in licence fee.
The company failed to pay dues on last date set by the Supreme Court requesting time from Department of Telecommunications to wait for outcome of its plea before the court.
The apex court has listed the matter for hearing next week in which Bharti Airtel and Vodafone Idea have requested modification in the original order dated Oct. 24 2019, to decide upon the payment schedule for AGR liabilities and any other relief measures with DoT.
"While telecom players may evaluate options to mitigate the impact of the adverse ruling, the event as such pose significant risk on VIL's credit profile. Nonetheless, the ratings factor in the possibility of some relief and/or grant of relief package (including deferment of spectrum dues) by the government to improve the overall financial health of the telecom sector, which will remain a key monitorable," India Ratings said in a its report.
The rating firm said that Vodafone Idea has classified Rs 10,200 crore from non-current borrowing to current maturity of long-term borrowing in the fourth quarter of 2019 for not meeting certain covenants in the financing documents.
"All relevant banks in this regard have not yet confirmed waiver of the covenants, resulting in a risk of acceleration of payment," the ratings agency said.