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Business News/ Companies / News/  Vodafone Plc says Group carrying value of investment in Vi is Zero, remains in need of additional liquidity

Vodafone Plc says Group carrying value of investment in Vi is Zero, remains in need of additional liquidity

Vodafone Idea still needs additional liquidity and the British-based parent Vodafone Plc hinted towards further fundraising. However, The UK-based Group has also said that their carrying value of investment in Indian business Vi is zero.

Vodafone Idea lost 1.3 million 4G subscribers  in Feb. mintPremium
Vodafone Idea lost 1.3 million 4G subscribers in Feb. mint

While announcing its FY23 earnings, British telecom company, Vodafone Plc said the Group's carrying value of investment in Indian listed firm Vodafone Idea is Zero. Also, that the Group is recording no further losses related to Vi. However, troubled-laden Vi is still in need of additional liquidity and plans to raise funds going forward.

In its FY23 report, Vodafone Plc said, "VIL remains in need of additional liquidity support from its lenders and intends to raise additional funding."

There are significant uncertainties in relation to VIL’s ability to make payments in relation to any remaining liabilities covered by the mechanism and no further cash payments are considered probable from the Group as at 31 March 2023, it added.

Furthermore, Vodafone said, "the carrying value of the Group’s investment in VIL is nil and the Group is recording no further share of losses in respect of VIL."

Read here: Vi shares rise despite pulling factors; details on Vodafone Group's earnings, dividend, outlook here

When Vodafone and Idea Cellular entered into an merger agreement in 2017, the parties had agreed to a mechanism for payments between the Group and Vodafone Idea, pursuant to the difference between the crystallisation of certain identified contingent liabilitiesin relation to legal, regulatory, tax and other matters, and refunds relating to Vodafone India and Idea Cellular.

Also, in the mechanism, cash payments s or cash receipts relating to these matters must have been made or received by VIL before any amount becomes due from or owed to the Group.

And hence, any future future payments by the Group to VIL as a result of this agreement would only be made after satisfaction of this and other contractual conditions.

Thereby, the UK-based telco said, "Vodafone Group's potential exposure to liabilities within VIL is capped by the mechanism described above; consequently, contingent liabilities arising from litigation in India concerning operations of Vodafone India are not reported."

Vodafone Plc's potential exposure under this mechanism is capped at 64 billion n (€719 million) following payments made under this mechanism from Vodafone to VIL, in the year ended 31 March 2021, totalling 19 billion (€235 million).

Read here: Vodafone to cut 11,000 jobs over 3 years; here's why

This year, on February 7, Vodafone Idea issued equities to the Indian government equivalent to 1.8 billion euros, representing the net present value of interest accrued on both deferred spectrum auction instalments and AGR dues pursuant to a relief package announced in September 2021 which is designed to improve the liquidity and financial health of the telecom sector.

In FY23, Vodafone Plc's revenue increased by 0.3% to €45.7 billion driven by growth in Africa and higher equipment sales, offset by lower European service revenue and adverse exchange rate movements. While adjusted EBITDAal declined by 1.3% to €14.7 billion due to higher energy costs, and commercial underperformance in Germany.

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Updated: 17 May 2023, 09:05 AM IST
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