Rating agency CRISIL has downgraded its rating on the Rs 3,500 crore non-convertible debentures of Vodafone Idea Limited to 'B+' from 'BB' while continuing the rating on 'Rating Watch with Negative Implications'. The primary reason for downgrading the telco's rating is the lack of relief from the Centre after the Supreme Court (SC) on February 14 refused to grant relief in the Adjusted Gross Revenue (AGR) case, CRISIL said.
After the SC ruling last week, the Department of Telecommunications (DoT) sent notices to telcos, including Vodafone Idea, regarding immediate payment of the AGR dues. Notably, Vodafone Idea partially paid Rs 2,500 crore on February 17 and made a further payment of Rs 1,000 crore on Thursday. The amount paid so far is still way below its total pending AGR dues of Rs 53,000 crore.
"...the amount payable is likely to be much higher than the above amounts, thereby enhancing the risk of invocation of bank guarantees provided by the company towards AGR related dues to DoT. This will, in turn, lead to a significant deterioration in VIL's financial risk profile," the CRISIL report said.
Vodafone Idea had made a total provision of Rs 44,150 crore (Rs 27,610 crore towards licence fee and Rs 16,540 crore towards spectrum usage charges) till Q2 ending September 30, 2019, as part of its AGR liability. "The existing liquidity (about Rs 12,530 crore as on December 31, 2019) will be insufficient if there is a payout of AGR liability of Rs 44,150 crore," the report said.
CRISIL says Vodafone Idea's rating remains on watch 'negative' as there's little clarity on the funding plan on the AGR dues. The agency says if the telco gets some relief from the Centre, it will remove the rating from negative watch.
Highlighting the telco's modest EBITDA (earnings before interest, tax, depreciation, and amortisation) of Rs 1,284 crore in Q3, a sequential rise of Rs 230 crore from Q2, the rating agency says it also lost 8.5 crore subscribers over the 12 months through November 2019. "Continued subscriber loss has negated the benefits of higher average revenue per user (ARPU) and synergy benefits," it added.
Despite the hike in tariffs, Vodafone Idea's debt protection metrics could remain weak in wake of the AGR issue, and delay in the planned monetisation of assets, it added. Telecom companies owe Rs 1.47 lakh crore to the DoT, including Rs 92,600 crore as licence fee and Rs 55,100 crore as spectrum usage charges. Vodafone Idea has to pay Rs 53,000 crore to the DoT.
Edited by Manoj Sharma