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SC rejects Vodafone plea to reassess dues

The high cash requirement could put a huge strain on the company’s already stressed balance sheets
The Vodafone Idea stock tumbled nearly 10 per cent in intra-day deals on Tuesday.

Our Special Correspondent   |   Mumbai   |   Published 22.07.20, 02:34 AM

Vodafone Idea (VIL) is staring at a bleak future with the Supreme Court on Monday rejecting a plea for the reassessment of the company’s dues even as it turned down an extended schedule of payments spread over 20 years.

The high cash requirement could put a huge strain on the company’s already stressed balance sheets – especially after reporting a loss of Rs 73,878 crore in 2019-20. Vodafone Idea has paid Rs 7,854 crore of its dues since the verdict last October and will need to pay up an additional Rs 50,400 crore, according to DoT’s calculations.

The court has, however, reserved its verdict on the timeline to pay the remaining dues. The matter is scheduled for hearing on August 10.

The Vodafone Idea stock tumbled nearly 10 per cent in intra-day deals on Tuesday. The scrip ended at Rs 8.31, a fall of 8 per cent over last close.

Brokerages such as Motilal Oswal estimate VIL would need to increase its average revenue per user (ARPU) by 73 per cent. The court has said it is open to the idea of a shorter payback period, which will further strain the cash flows.

Motilal Oswal analysts said VIL would require a Rs 85 increase in ARPU to achieve an earnings before interest tax depreciation & amortisation (EBITDA) of Rs 30,000 crore by 2021-22 from present estimated EBITDA of Rs 9,700 crore to pay its  obligations.

“We have not factored in any additional subscriber churn, which could make it worse ,” the analysts said.

“VIL will need equity infusion along with strong operational improvement even if it gets 15 year deferred payment option. Our analysis shows that even if VIL manages to secure 15 year deferred payment plan, it will need meaningful equity infusion by the second half of 2022-23,” analysts at Credit Suisse said in a note.

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