Vodafone Idea (Vi) cleared bank dues pretty fast in FY24. Vi's debt from banks and financial institutions stood at Rs 111.3 billion in Q4 FY23. In FY24, the telco reduced it by Rs 70.9 billion, reducing the total debt in the segment to Rs 40.4 billion. Note that this is just the debt from banks and financial institutions. The debt towards the government stood at Rs 2,034.3 billion (to put into context for easier understanding, that is more than Rs 2 lakh crore).
The cash-strapped telco doesn't want to default on paying off banks and financial institutions' debt for two reasons. The first reason is because it wants to raise more debt from them and avoid late payment interest which will be an added burden. The second reason is that banks and financial institutions can drag Vi to the bankruptcy court.
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Due to the heavy focus on dues payments, Vi can't use that money for capex (capital expenditure) on mobile networks. However, with the recent fundraising of Rs 20,000 crore (in total from a promoter group company and FPO), the telco is set to expand the 4G capacity and coverage to give users a better experience.
The cash and bank balance of Vi stood at Rs 1.7 billion at the end of March 31, 2024, which is about Rs 170 crore. The telco has many commitments towards vendors, tower companies, government, and banks to pay off dues. During the investors' call, Vi said that it will use the money it earns through customers to pay off dues and the money raised through equity for capital expenditure. This is the strategy Vi wants to employ to ensure that it can keep going in the long-run. The telco's revenues haven't grown much over the last year, and its EBITDA percentage has also largely stayed flat.
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Vi needs to cut costs and improve margins in the short-term to narrow losses. At the same time, the telco is eyeing to raise tariffs in the near future to boost ARPU (average revenue per user) and increase overall revenues.
