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Vodafone Group flags cash flow challenges for Voda Idea, may pay Rs 285 crore by September

The second tranche will help the telco meet some of its opex or capex needs. The carrier also faces AGR based dues to the government. The carrier has paid Rs 6,854 crores so far against the government demand of Rs 58,254 crore. Vodafone Group though has estimated the liabilities at around Rs 51,400 crore.

, ET Bureau|
Last Updated: May 13, 2020, 09.36 AM IST
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MUMBAI: The Vodafone Group will inject Rs 285 crore (35 million euros) more into India telecom joint venture Vodafone Idea by September, as per an arrangement agreed during the 2018 merger of its Indian subsidiary and Idea Cellular.

While announcing the fund infusion, the UK group also raised concerns over Vodafone Idea's ability to generate cash to settle or refinance its liabilities and guarantees, including those related to its dues to the government based on adjusted gross revenue.

This is in addition to a $200 million payment the Vodafone Group had announced in April under the contingent liability mechanism (CLM). "…the group has assessed a cash outflow of 235 million euros under the agreement to be probable at this time and provided for this amount at 31 March 2020.”

The second tranche will help the telco meet some of its operational expenditure. The carrier also faces AGR-based dues to the government. It had paid Rs 6,854 crore in three installments against the government’s demand of Rs 58,254 crore. The Vodafone Group though said DoT in the court submission had estimated the AGR liabilities at around Rs 51,400 crore.

At the time of injecting the funds in April, the group had said the payment was to provide the Indian telco with liquidity to manage its operations amid the Covid-19 crisis.

The Vodafone Group, Aditya Birla Group and Idea Cellular had agreed that the Vodafone Group and Vodafone Idea would reimburse each other on set dates for certain identified pre-merger liabilities and assets that could crystallise in future. Vodafone Group’s potential exposure under this mechanism was limited to Rs 8,400 crore (or 1.1 billion euros based on the exchange rates at the time). The UK based telco on Tuesday confirmed this.

Meanwhile, the group again raised concerns over the Indian venture, which is struggling under the AGR crisis. "Significant uncertainties exist in relation to Vodafone Idea’s ability to generate the cash flow that it needs to settle, or refinance its liabilities and guarantees as they fall due, including those relating to the AGR judgement," it stated.

The Supreme Court is considering a case over the modality of the AGR payment. The UK group, in its preliminary results, said that it made a loss of 0.5 billion euros in FY20. "Vodafone's share of losses related to Vodafone Idea (2.5 billion euros) is principally due to adverse legal judgments by the Supreme Court in India,” the Vodafone Group said, while noting that the value of Vodafone Idea on its balance sheet was nil.

The Group said it has also extended the long stop date on the agreement to merge Indus Towers and Bharti Infratel to June 24. Vodafone Idea holds a 11.15% stake in Indus Towers and is looking to raise Rs 4,000-4,500 crore by selling its stake in the merged Indus Towers-Bharti Infratel entity.
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