Vodafone Idea Lenders In Fear As Fail Could Be Massive

Already, some private lenders with a funded exposure have started making provisions but a bulk of the exposure is to the banks in the public sector. If VIL fails to repay the dues it owes to the governments and the guarantees are invoked, then it will immediately turn into debt and might soon be categorised as a non-performing asset.

Highlights

  • If VIL fails to repay the dues it owes to the governments and the guarantees are invoked, then it will immediately turn into debt and might soon be categorized as a non-performing asset
  • Notably, IDBI is claimed to have up to 40% margins for the guarantee provided
  • When it comes to banks, the debt recovery is contingent on Vodafone Idea’s operation and retaining customers

Follow Us

Vodafone Idea
Just a day after the revelation of the warning letter from Kumar Mangalam Birla to Vodafone Idea about an irretrievable point of collapse, banks are getting worried about the telecom major. They claim it to be “too big to fail”. Both Indian and global lenders have an exposure of Rs. 1.8 lakh crore. It is said that a large part of this is in the form of guarantees.

Vodafone Idea Crisis

Already, some private lenders with a funded exposure have started making provisions, but a bulk of the exposure is to the banks in the public sector. If VIL fails to repay the dues it owes to the governments and the guarantees are invoked, then it will immediately turn into debt and might soon be categorised as a non-performing asset.




The take on public sector banks will not be huge as their exposure as lenders have been demanding a higher cash margin from Vodafone for the guarantees. Notably, IDBI is claimed to have up to 40% margins for the guarantee provided. This will be large to wipe out profits for many.

When it comes to banks, the debt recovery is contingent on Vodafone Idea’s operation and retaining customers. The company continues to have close to a quarter of the Indian market. But this situation might witness changes overnight if there is a default.

As per the bankers, the process of insolvency works when there are buyers. In this case, Rs. 53,000 crore AGR dues are a deterrent to the Centre. What’s worth mentioning is that this is despite Birla being ready to write down his equity.

Will Vodafone Idea Clear Debts?

The Centre cannot make an exception for a company, which makes the government dues unavoidable. In the insolvency cases, the telecom department claimed its dues to be that of a financial creditor though there are attempts to make them operational. The challenge is there is uncertainty over the telecom department’s claims that are being experienced by lenders in the insolvency case of Reliance Communication. Lenders do not want to disk insolvency as this might end up in the exit of customers as in the RCom case.

Besides the debt obligations of the company being 1.5% of the banking sector’s credit, VIL is a large telecom infrastructure provider, claim lenders. Many business applications use their networks, and it is one of the largest IoT service providers as well. As per a bank executive, insolvency could be a worst-case scenario as customer migration will be a risk.

Reported By

Editor in Chief

Tanay is someone with whom you can chill and talk about technology and life. A fitness enthusiast and cricketer, he loves to read and write.

Recent Comments

Faraz :

Nice.. & BSNL 60 Mbps is even perfect plan for many if there are more than 5 devices connected. Many…

BSNL 60 Mbps Plan is Likely One of the Best…

Faraz :

Budget phones have degraded more than any other budget phones since pandemic. They are still selling some craps like Helio…

POCO C61 to Launch on March 26, 2024

shivraj roy :

i feel Vi has improved than what it was in 2022 i usually get around 8-10mbps in very heavily dense…

5G Users Consuming 3.6 Times More Data than 4G Users…

biswadeepmondal :

JioAir Fiber is working very well in KPA & HLR. Sadly they don't have any data only plan.

REP: Airtel Expands Network Footprint in Bankura District of West…

Anonymous :

In line with Airtel's ?49 plan that offers 20GB of data for the same duration.

Jio Brings New Rs 49 Plan

Load More
Subscribe
Notify of
17 Comments
newest
oldest most voted
Inline Feedbacks
View all comments