The government is examining additional relief measures for Vodafone Idea (Vi) amid mounting concerns over the telecom operator's long-term financial sustainability. Officials indicate that even a proposed extension of adjusted gross revenue (AGR) dues repayment from six years to 20 years may not be sufficient to keep the company afloat beyond FY29.
Also Read: Banks Hesitant to Extend Fresh Loans to Vodafone Idea After AGR Verdict
Government Rules Out Further Equity Conversion
The government has said it has no plan to convert more arrears into equity that would increase its stake in the company beyond the existing 49 percent. Other options being considered, such as allowing Vi to pay the adjusted gross revenue-based arrears over 20 years instead of the current six, may still not provide enough cash flows for sustaining company operations beyond 2028–29, ETTelecom reported, citing government officials.
Doubts Linger Over Vi's Sustainability
According to the officials, various options are being explored. These include "extending the tenure of AGR payments from the scheduled six annual instalments of Rs 18,064 crore to over 20. But despite that, the long-term sustainability of the company remains in doubt," one official was quoted as saying in the report.
DoT Projects Financial Strain Beyond FY26
The Department of Telecommunications (DoT), based on the current and potential future financial situation of Vi, reportedly believes that if the company is required to pay the full Rs 18,064 crore instalment due by end-FY26, it would not have funds to meet the liability in FY27. Even if annual instalments are reduced to Rs 6,000–8,500 crore each by extending the payment period, it still would not bring any tangible benefits. Even under a restructured schedule, officials believe Vi's limited cash flows may make it difficult to meet liabilities post-FY29.
In a worst-case scenario, the payment tenure could be as long as 50–100 years, a second official was quoted as saying.
Also Read: Communications Minister Rules Out AGR Relief, Says Vodafone Idea Must Stand on Its Own
Cash Flow Challenges Mount
At the end of March, Vi reported a cash and bank balance of Rs 9,930 crore. In March 2025, the government converted Rs 36,950 crore of spectrum arrears into equity, making it the largest shareholder with a 48.99 percent stake. However, it has ruled out any further conversion of dues into equity.
Prior to this conversion, Vi had presented financial projections through FY31—the deadline for AGR dues repayment mandated by the Supreme Court. The company had previously received a four-year moratorium on AGR and spectrum dues beginning FY22. With the moratorium now ending, Vi is required to make full annual payments starting this fiscal, with deadlines set for March 31 each year.
Also Read: Vodafone Idea Says It Can’t Operate Beyond FY 2025–26 as Banks Refuse Loans
Government officials said the company had communicated its inability to meet the post-moratorium payment schedule during various meetings with the DoT. Vi’s projected liability for FY26 exceeded Rs 30,500 crore before part of the dues were converted to equity.
"The company had shown its inability to meet the post-moratorium payment schedule of spectrum and AGR payments during various meetings with DoT," a third official was quoted as saying.
Analysts, Auditors Warn of Looming Cash Shortfall
An Analyst was quoted as saying that the company may not be able to meet its obligations beyond FY26 without securing over Rs 25,000 crore in loans. Brokerage firm Motilal Oswal recently cautioned that the absence of relief on AGR dues and delays in funding could result in an annual cash shortfall of Rs 20,000 crore for the telco.
Also Read: Government Stake in Vodafone Idea Rises to 48.99 Percent After Fresh Equity Allotment
In its January–March 2025 earnings report, Vi posted a net loss of Rs 7,166 crore, up from Rs 6,609 crore in the previous quarter. Its statutory auditor, SR Batliboi & Associates, flagged concerns about the company's ability to generate adequate cash flows to meet its financial obligations.
Vi's board has approved a plan to raise Rs 20,000 crore through equity or debt, and discussions with lenders are ongoing.
"The group's ability to continue as a going concern is dependent on support from the DoT on the AGR matter, successfully arranging funding and generation of cash flow from its operations that it needs to settle its liabilities as they fall due," the auditor said, as mentioned in the report.
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