Vodafone Idea (Vi), the third-largest telecom company in India, is in a tough spot financially. The company is trying to pay off the financial institutions first before doing anything else as it is trying to avoid bankruptcy. The telco had recently paid Rs 2700 crore to the State Bank of India (SBI) before even the due date of the said payment. Because of the financial woes, Vi might find it difficult to expand network services, introduce new products in the market and also at the same time be able to pay back the financial creditors. Vodafone Idea needs to prioritise paying back to the financial creditors, and that is what the company is doing. If you are wondering how this is saving Vi from bankruptcy, let us explain.
Why Vodafone Idea Could be Dragged into Bankruptcy Court
As per the laws in India, if a company defaults in payments to the financial creditors, then the financial creditors have the power and the right to drag the company directly to the National Company Law Tribunal (NCLT). For the unaware, NCLT is the dedicated bankruptcy court in India. To do this, the financial institutions don't even require to give any prior notice.
The same thing can't be done by the vendors who have supplied the company equipment, technology, and services on credit. According to an ET Telecom report, the vendors are considered to be the operational creditors. The process for operational creditors to drag a company into the NCLT is much lengthier.
Vodafone Idea's dues to the lenders or the financial creditors have reduced to Rs 15,080 crore in the quarter ending September 2022 from Rs 23,400 crore in the June quarter of FY22, the report added. While there have been no worries about the company being dragged into bankruptcy court as of now, the report from ET suggests that the move of Vi to pay off the financial creditors first is to save itself from the position of being put in front of NCLT.