Home / Markets / Mark To Market /  Amid SC setback, Voda Idea shows it will not give up without a fight

Vodafone Idea Ltd’s future hangs by a thread, now that any concession from the courts may have been ruled out. But as the saying goes, as long as there is life, there is hope. So the company is putting its best foot forward, despite the many odds it faces.

While the markets had begun pricing a bankruptcy situation after the Supreme Court’s adverse ruling on Friday, Vodafone Idea said on Saturday it will make a part payment to the government based on its assessment of available funds. The company owes about 44,000 crore, which is required to be paid before the court’s next hearing on 17 March.

In end-December, the company had cash and cash equivalents worth 12,530 crore. But this may have depleted to about 10,000 crore by now, based on the rate of cash burn in the past two quarters.

Graphic by Naveen Kumar Saini/Mint
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Graphic by Naveen Kumar Saini/Mint

A moot question is how the company will survive if the cash in its hands is less than a fourth of dues payable in a month’s time. “It looks like Vodafone Idea is hoping for some reprieve after an initial payment. The logic seems to be that by showing its intent to pay, it stands a better chance of getting relaxation in the form of a moratorium," says an analyst at a domestic institutional firm, requesting anonymity.

Meanwhile, the company’s Q3 results also show that it won’t give up without a fight.

The company reported a 2.3% sequential increase in revenue to 11,089 crore in the December quarter, the highest growth since the merger between Vodafone India Ltd and Idea Cellular Ltd in 2018.

According to the analyst mentioned above, there were large shifts in interconnect usage charges (IUC)-related revenue and payments last quarter, after Reliance Jio Infocomm Ltd started charging a fee for calls made outside its network. Adjusted for this, subscriber revenue rose by more than 3% for Vodafone Idea, which is only slightly lower than Jio’s adjusted revenue growth of about 3.5%, he said. This is significant, given the backdrop of a far bigger balance sheet and stronger network of Reliance Jio.

Also note that for the first time in many quarters, Vodafone Idea reported an increase in its post-paid subscriber base, as well as the number of data subscribers. What’s more, Vodafone Idea’s adjusted operating profit rose more than 16% to 1,280 crore.

While all this is good, Vodafone Idea’s balance sheet is getting progressively worse. Its net worth has fallen from 69,540 crore a year earlier to merely 17,623 crore at the end of the December quarter. In other words, it stands on thin ice, even if the immediate regulatory dues are taken care of.

Clearly, Vodafone Idea’s survival in the long run will depend on many more things falling in place, starting with adequate recapitalization of the company.

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