Bankers put cash-strapped Vodafone Idea's call for Rs 35K cr loan on hold

Fund-strapped telco says banks have completed techno-economic evaluation, a key step in debt funding process

Public-sector banks (PSBs) remain hesitant on providing loans to cash-strapped Vodafone Idea (Vi), India’s third-largest telecom operator due to its liabilities and lack of a clear capital expenditure plan, three senior bank officials from as many banks said, requesting anonymity.

However, Vi told Business Standard that a key milestone in the debt-funding process was the updating of the independent techno-economic evaluation (TEV) initiated by the banks, which has been completed. It didn’t clarify if the TEV report was favourable to its debt-funding process.

Bankers had earlier advised Vi to raise equity before seeking loans. Despite the telco raising Rs 24,000 crore in equity, bank officials said concerns persist over the company’s multiple payment liabilities to the government, vendors, and tower companies.

“If Vi expects that banks will be the sole funders, it will be challenging without proper equity and clarity on liabilities. Vi is seeking Rs 35,000 crore,” a senior bank official said, adding that it would take a decision only after getting a comprehensive plan for capex.

“We are on track with the fund-raising plan outlined earlier this year. We had shared a target of raising Rs 45,000 crore via a combination of equity and debt. As part of the plan, we have already raised Rs 18,000 crore in India’s largest FPO and preferential issuance of equity shares worth Rs 2,080 crore to ABG entity (promoter group),” a Vi spokesperson said.

Vi has outlined a capex guidance of Rs 50,000-55,000 crore over the next three years with focus on expanding 4G coverage in 17 priority circles and rolling out 5G in key cities. Much of this is expected to be spent over the next 12-15 months, the telco’s leadership had said in August.  Meanwhile, Vi is in talks with vendors to order equipment and start deliveries by the end of September.

The bankers also flagged the lack of a substantial 4G customer base, which saw it lose 2.5 million fewer subscribers in the April-June quarter of FY25. They pointed out Vi’s outstanding dues to the government and tower firms.

Fundraising not enough

Earlier this year, bankers had stressed that VI’s liabilities and their repayment schedule would play a major role in determining their status. The sentiment seems to have remained the same.

“Considering the competition in the telecommunications market, we need to evaluate the company’s strength. Though Vi has a good backing, we may reconsider in the future if the situation changes,” a third bank official said.

Senior officials at state-run Power Finance Corporation and REC on Tuesday said Vi had been in discussion with them for over a year now. “Given the financial turbulence that the company is in, we are trying to navigate it. A decision has not been made. But it’s a tricky situation,” said an official.

The two energy non-banking finance firms are looking to expand to newer sectors. An official, however, said they would not venture into something where the risks outweigh opportunities.

In a respite for the firm, the debt from banks and financial institutions reduced to Rs 4,650 crore in Q1 from Rs 9,200 crore a year ago. But the company has to pay Rs 12,000 crore to the government between October 2025 and March 2026, followed by Rs 43,000 crore annually from FY27 to FY31

The government is Vi’s largest creditor with 33.4 per cent equity stake post the conversion of the company’s interest dues worth Rs 16,000 crore. 

The interests had piled up as a result of its deferred adjusted gross revenue and spectrum instalments.

(With inputs from Shreya Jai)