Vodafone Idea (vi): Government’s Rescue Plan For Agr Dues

Among the options on the table to deal with adjusted gross revenue (AGR)-related charges is raising the payment period to twenty years from 6 currently and simultaneously applying a basic passion on the impressive quantity as opposed to substance interest, or interest on interest, individuals aware of the information informed ET. If such terms undoubtedly put on Vi, its yearly payment concern will certainly shrink substantially, although some are questioning whether telco’s existing cash flows are sufficient to honour even one of the most charitable repayment covenants. Asecond alternative is to charge a token amount of around Rs 1,000-1,500 crore yearly towards part repayment of those dues up until a decision is tackled the broader AGR issue, stated a person aware.

To make sure, the federal government had actually earlier transformed Rs 36,950 crore of range auction financial obligations right into equity in March, and became the biggest investor in the telco, with a 49% risk. These defaults were associated with pre-2021 range public auctions. The firm still requires to pay the instalments for post-2021 auctions.

“But because the firm won’t be able to pay also that quantity offered its cash flows, the instalments could be extended to two decades. In such a case, the yearly outgo might be lower,” said the initial individual mentioned above. In its scenario-building for Vi, the federal government estimates that if the business is needed to pay the complete Rs 18,064 crore instalment due by end-FY26, it would certainly not have funds to fulfill the obligation in FY27 and therefore may go bankrupt. SURVIVAL AT risk And also if the annual instalments are decreased to Rs 6,000-8,500 crore each by prolonging the repayment period, it would still not bring any substantial benefits and, given the telco’s cash flows, it might not fulfill the obligations past 2028-29.

“In addition to these two alternatives, a few other imaginative proposals are likewise being explored, and the alleviation might be provided by either one or a combination of choices,” said one of the persons cited above, on the problem of anonymity. One more individual stated the federal government’s intent is to maintain the company afloat. If Vi folds up, New Delhi would certainly be the greatest loser: The Centre is the biggest investor with a 49% risk, and a bulk of the exceptional dues would certainly concern the treasury.

Vi’s Financial Woes & Government Intervention

New Delhi: The Centre, currently the greatest equity owner in Vodafone Idea (Vi) via conversion of earlier receivables right into stock, is considering numerous choices to supply the telco more alleviation on exceptional regulatory dues of Rs 84,000 crore over concerns that the telecommunications driver would certainly go to pieces without executive latitude.

“Vi can save over Rs 16,000 crore in passion price after the conversion if the choice is implemented prospectively. In case the interest is converted into basic rate of interest of 8-10%, the annual instalment would be around Rs 15,000 crore.

“Given that the understood or existing options (such as waiving the interest and fines) are not exercising, something new has to be created. Whatever option is settled, it would certainly be lawfully tenable,” stated the second person.

In its scenario-building for Vi, the government approximates that if the business is needed to pay the complete Rs 18,064 crore instalment due by end-FY26, it would not have funds to fulfill the responsibility in FY27 and therefore may go bankrupt.

Exploring Solutions for AGR Dues

Amongst the alternatives on the table to deal with adjusted gross profits (AGR)-relevant fees is raising the settlement period to 20 years from six now and concurrently using a basic rate of interest on the superior quantity instead of compound rate of interest, or passion on interest, people conscious of the details told ET. Vi has impressive AGR charges to the song of Rs 83,400 crore as of March 2025, yearly settlement instalments of which loss due beginning March, 2026, and require to be paid until March, FY31. At the end of March, its cash and financial institution equilibrium amounted to Rs 9,930 crore, and the federal government fears that without any alleviation on the AGR dues, the company won’t survive.

The telco has been attempting to elevate Rs 20,000- 22,000 crore from its lending institutions, which have actually sought extra clearness around the AGR charges before expanding credit scores. Previously this month, the firm’s board additionally approved increasing up to Rs 20,000 crore more through different instruments.

The federal government is discovering methods to reduce Vodafone Concept’s economic worry. Choices consist of extending the payment duration for AGR dues and transforming the interest computation technique. The goal is to prevent the telecom driver from collapsing. The government is the biggest investor and intends to secure its financial investment. Vi faces substantial repayment obligations in the coming years.

Interest Rate Conversion

In situation the rate of interest is converted into easy passion of 8-10%, the yearly instalment would be around Rs 15,000 crore.

The company had actually informed the federal government that it was unable to pay both the AGR and spectrum dues after completion of a four-year moratorium this monetary. Its annual payments before the equity conversion were more than Rs 30,500 crore for FY26, however also after the equity conversion, the company requires to pay over Rs 20,000 crore in yearly instalments, including both AGR and range public auction charges.

Vi has exceptional AGR because of the tune of Rs 83,400 crore as of March 2025, yearly payment instalments of which fall due starting March, 2026, and need to be paid till March, FY31. As things stand, the loss-making telco requires to pay Rs 18,064 crore by March of this financial year. At the end of March, its cash money and bank balance completed Rs 9,930 crore, and the federal government is afraid that with no relief on the AGR dues, the firm won’t endure.

PASSION COST financial savings Currently, telcos such as Vi and Bharti Airtel, which are influenced by the 2021 AGR judgment of the High court, pay around 29-30% substance passion yearly on the exceptional charges. If the exact same is exchanged simple rate of interest of 8-10%, it would certainly lower the total outgo and build-up for the coming years.