Vodafone Idea (Vi), the third largest telecom operator in India, is in discussion with the banks to refinance some of the debt and also for softer repayment terms. The telco has been struggling to make ends meet because of its poor cash flow situation. According to an ET report, the telco is looking for refinancing of up to Rs 4000 crore loan. This would free up some cash for Vi in the short term. The telco can potentially use this cash to pay the dues to Indus Towers and network gear vendors, including Nokia and Ericsson.
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According to the report, Vi is in the preliminary stage of discussion with the banks and has not yet submitted a formal refinancing proposal. Vi is also looking for softer repayment terms from the banks. There were also reports that Vi would look to raise fresh funds via loans from the banks. But the banks are unlikely to give money to Vi here as the telco's balance sheet is already spread too thin, and further debt is just going to make it worse. At the end of the September 2022 quarter, Vi's cash balance was Rs 190 crore only, while its debt stood at Rs 2.2 lakh crore.
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If the banks have to help Vi here, it is likely going to come in the form of refinancing existing loans. A fresh loan is looking difficult for the telco to raise here. The discussions for refinancing loans come after the government decided to go ahead with the conversion of interest dues into equity in Vi. Post the conversion, the Indian government is the single largest stakeholder in Vi, with an equity stake of 33.44%.
The report adds that promoters of the telco, including the Aditya Birla Group (ABG) and the Vodafone Group UK, are planning to invest up to an additional Rs 5000 crore in the telco. While this money would certainly be of help, it won't be enough to enable the telco to get out of its difficult situation.