AGR dues: Multiple provident funds had loaned money to crisis-hit Voda Idea

More than one provident fund had loaned money to beleaguered telecom major Vodafone Idea Limited (VIL), said to be on the verge of a collapse over liabilities to the government and a heavy debt burden amid industry stress. 

At least three provident and pension fund schemes are seen to have invested in its debentures. This includes the National Pension Scheme, the Board of Trustees for Bokaro Steel Employees Provident Fund and MTNL Employees Provident Fund Trust, show regulatory filings by the company.  

The promoters of the firm have been reluctant to put in additional money into the company according to statements made at various times, suggesting the possibility of the company shutting down.

The current status of the investments was not immediately clear in all instances. For example, filings also include a September 2019 letter stating that MTNL Employees Provident Fund Trust had been paid in full for its investments. The transaction was a prepayment of the amount owed.

“We, MTNL Employees Provident Fund Trust, confirm that the outstanding principal amount along-with accrued interest till the date of prepayment under the captioned debenture has been paid in full and final on 4th September 2019. Further, we have no objection to the company filing for satisfaction of charge with the Registrar of Companies,” said the letter.

The prepayment amount was Rs 5 crore. It was unclear what total exposure of other funds might be.  

Vodafone Idea is required to pay Rs 53,038 crore to the government as per the Supreme Court order which came in October. The court on Thursday rejected a petition for review by telecom companies including Vodafone Idea, as well as rivals Bharti Airtel and Tata Teleservices against the October order.

The companies are said to be contemplating the filing of another petition in the Supreme Court.

Analysts believe that some government intervention or higher prices from consumers would be only way that the company can pay the amounts due on adjusted gross revenue (AGR) to the government and meet other obligations.

“The company has no source of cash to pay the liabilities and was entirely dependent on payment relief. It has cash merely to continue operations for the next 2-3 quarters. Taking the AGR liability aside, our workings indicate VIL (post recent price hike) has a deficit of INR40-50b (Rs 4000-5000 crore) to cover cash interest and capex from operating cash flow,” said the 17th January Motilal Oswal Financial Services Sector Update report authored by analysts Aliasgar Shakir, Suhel Shaikh and Anshul Aggarwal.

Bharti Airtel is in better shape after recently raising over Rs 20,000 crore from investors. The stock was up 5.47 per cent to close at Rs 499.8 after the latest Supreme Court decision. Vodafone Idea’s shares dropped 25.83 per cent to close at Rs 4.45 on the National Stock Exchange. 

Retirement money:

-Provident and pension funds had Vodafone exposure

-Investors included NPS, Bokaro Steel, MTNL

-Filing indicates prepayment to MTNL

-Fears of Vodafone shutting down

-Mutual funds had marked down exposure