Crisil Downgrades Vodafone Idea's Debt Issue Over Government Dues

Crisil on Thursday downgraded Vodafone Idea's non-convertible debentures worth Rs 3,500 crore citing diminishing expectations of a relief from the government in the adjusted gross revenue (AGR) matter for the beleaguered telecom company. In a statement, Crisil said the rating was revised to 'CRISIL B+' from 'CRISIL BB', and remained on "watch with negative implications". The rating action reflects its expectation of "a lower likelihood of any relief from Government of India after the Supreme Court on February 14, 2020, did not grant any relief to the telecom companies, including Vodafone Idea, on adjusted gross revenue (AGR) dues", Crisil said.

Last week, the Supreme Court had directed telecom service providers - including Vodafone Idea, Bharti Airtel and Tata Teleservices - to clear their dues before the next hearing date of March 17, 2020.

Subsequently, the Department of Telecommunication (DoT) sent notices to the telecom companies for immediate payment of adjusted gross revenue (AGR) dues on February 14, 2020.

To comply with the order, Vodafone Idea partially paid Rs 2,500 crore to the telecom department on February 17, 2020 and said it would make a further payment of Rs 1,000 crore by the end of this week.

However, the actual amount payable is much higher, thereby enhancing the risk of invocation of bank guarantees provided by the company, according to Crisil. This will in turn lead to significant deterioration in Vodafone Idea's financial risk profile, the ratings agency added.

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 the quarter ended September 30, 2019, for the disputed liability towards AGR.

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, Crisil pointed out.

Crisil has retained the rating on watch negative, pending clarity on the funding plan by Vodafone Idea for clearing the AGR dues and any further relief that may be provided by the government, the rating agency said. CRISIL said that it will remove the rating from watch negative and take a final rating action after there is clarity on these issues.

Vodafone Idea is one of the leading mobile service providers in India, with operations in 22 service areas across the country. The Vodafone Idea stock has soared 11 per cent to Rs 4.6 on the BSE in a subdued market.

The shares of the telecom firm had skyrocketed 48 per cent in the previous trading session on Wednesday.