Vodafone Idea recently posted the highest-ever quarterly loss by any corporate in India with a loss of Rs 50,921 crore. Now, the company is reportedly seeking relief from the Government.
Following the loss, Vodafone Idea said its ability to continue as a going concern is dependent on obtaining relief from the government and positive outcome of the proposed legal remedy.
The company is also in the process of filing a review petition against the Supreme Court order.
Currently the nation's second-largest phone operator, the British Vodafone's local unit had merged with Kumar Mangalam Birla’s Idea Cellular in 2018. Since the announcement in 2017 however, the company hasn't seen any profit.
The recently announced massive net loss was on acount of the Supreme Court judgement on the Adjusted Gross Revenue (AGR) matter. The apex court has upheld the government's position on including revenue from non-telecommunication businesses in calculating the annual Adjusted Gross Revenue (AGR) of telecom companies, a share of which has to be paid as licence and spectrum fee to the exchequer.
Vodafone Idea said in a regulatory filing that the SC order on AGR has resulted in liabilities on accounts of licence fee and spectrum charges to the tune of Rs 44,150 crore which has to be paid within three months.
Vodafone Idea has estimated a liability of Rs 44,150 crore post the apex court order, and made a provision of Rs 25,680 crore in the second quarter of the current fiscal. The company said it has "accounted for the estimated liability of Rs 27,610 crore related to license fee and Rs 16,540 crore related to Spectrum Usage Charges up to September 30, 2019, including the interest, penalty and interest... of Rs 3,3010 crore".
In the second quarter of 2018-19, Vodafone Idea reported Rs 4,874 crore loss.The company's revenue in the three months ended September 2019 rose 42 per cent to Rs 11,146.4 crore.
Market players say that Vodafone may see a "significant" erosion in its market cap now. Analysts said that the company's lenders, especially those who have not provided for the Vodafone Idea's Q2 loss, might struggle on the exchanges in the near term.
"Most private banks like HDFC, Kotak, Yes Bank, Axis Bank and IndusInd Bank are lenders of Vodafone Idea, but banks which may not have provided for the losses will have a difficult time in the near term," said Narendra Solanki, Head, Fundamental Research, AVP Equity Research, Anand Rathi Shares & Stock Brokers.
Deepak Jasani of HDFC Securities also said that Vodafone Idea's losses may cause significant damage to its share value, while its lenders will also feel the pinch in the near term.
As per latest estimates by Department of Telecommunications, Bharti Airtel faces a liability of around Rs 62,187 crore (including share of Tata Group of companies and Telenor India), while Vodafone Idea may have to pay about Rs 54,184 crore. The remaining liability is with state-owned BSNL/ MTNL and some of the shut/ bankrupt telecom companies.
On Wednesday, the DoT shot off notice to telecom operators to pay their revenue share dues within three months as directed by the Supreme Court. It has given option to telecom operators to clear all the dues on self-assessment basis.
(With agency inputs)