Photo: Mint
Photo: Mint

Brickwork Ratings downgrades Vodafone Idea’s NCDs

  • On 3 December, VIL hiked its prepaid tariffs by up to 42% and kept postpaid tariffs unchanged
  • The NCDs have been downgraded to BBB- from A-

NEW DELHI : Brickwork Ratings has downgraded its rating on non-convertible debentures (NCD) of Vodafone Idea Ltd (VIL) aggregating to 2,500 crore to BBB- from A-, the telecom company said in a filing with the exchanges.

The downgrade is on account of considerable impact of the adjusted gross revenue (AGR) liability on the financial performance of the company, resulting in huge losses, erosion of net worth and deterioration in the overall risk profile of the company, VIL said.

“VIL has provided for liabilities of 27,610 crore towards license fee and 16,540 crore towards spectrum usage charges in its H1 FY20 financial results. In addition, the company has been losing subscribers over the past eight quarters," the ratings agency said.

While the company filed a review petition against the Supreme Court’s 24 October judgement on AGR dues, uncertainty remains with respect to the payment.

On 3 December, VIL hiked its prepaid tariffs by up to 42% and kept postpaid tariffs unchanged. While, VIL has increased the tariffs, its impact on the company’s financial performance as well as subscriber base is yet to be seen.

“In its Q2 FY20 results, the company has recognized an additional charge of 25,677.90 crore as an exceptional item in relation with the AGR dues. The company is in the process of re-farming its 3G assets to be used for 4G technology and accordingly, some of its assets will not remain usable. The company has thus, charged an amount of 4,032 crore as accelerated depreciation for the said assets," the ratings agency said

“In addition, VIL has derecognized deferred tax assets amounting to 13,935.60 crore, recognized in the past. The cumulative impact of all of the above along with the normal business losses has led to the biggest ever quarterly loss of 50,921.90 crore reported by the company," the agency added.

Brickwork Ratings had in November downgraded the firm's NCD rating to A- from A+ citing the court ruling on AGR and on issues related to the sale of stake in Indus Tower to Bharti Infratel.

Shares of Vodafone India closed 5.8% lower at 7.31 rupees on the BSE.

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