Bank funding may stay out of reach without relief on the adjusted gross revenue (AGR) front for Vodafone Idea, making an additional equity raise the only viable alternative, even as the telco continues discussions with lenders on debt financing, which remains a key factor to watch, analysts at leading brokerages said.
“We believe bank financing could remain elusive, if there is no reprieve on the AGR front, in the absence of which, a further equity raise becomes the only way forward. The company remains engaged with lenders on debt raise plans, which remains a key monitorable,” Kotak Institutional Equities said.
Though the government’s recent equity conversion has eased some pressure, Vodafone Idea’s network expansion remains hamstrung by its limited ability to fund capex, an issue closely tied to the unresolved AGR liability.
“At the current juncture, Vi is akin to a binary option, with two extreme outcomes, depending on government support (or lack thereof). We await signs of subscriber base stabilization and fund raises to meet the funding gap to turn constructive,” Kotak Institutional Equities added.
While measures such as the Department of Telecommunications (DoT) converting dues into equity and vendor support are encouraging, they aren’t yet enough to make Vodafone Idea an investible bet.
Meanwhile, in an interview with the Times of India, union telecom minister Jyotiraditya Scindia ruled out any more government relief for the struggling Vodafone Idea after Supreme Court dismissed a petition by telecom companies to waive off penalties and interests accrued over the AGR.
“Investor focus is now solely on debt fund-raise needed to fund capex, which continues to be delayed. While parameters such as the pace of subscriber loss and ARPU also need to improve, it is the balance sheet repair that has become highly crucial for VIL’s survival,” Nuvama said.
According to Citi Research, while rising capex is helping improve 4G coverage, launch 5G services, and narrow subscriber losses, completion of the pending debt raise remains key to sustaining momentum, which in turn appears contingent on some AGR relief.
In Q4, Vodafone Idea increased its capex by 32% quarter-on-quarter to Rs 4,230 crore. Capex for the second half of FY25 stood at Rs 7,440 crore, a 251% jump over the first half, as the company ramped up network coverage and capacity. This increased 4G network coverage from 77% to 83% over the year.
The company has guided for capex of Rs 5,000–6,000 crore over the next two quarters, with the majority expected to be spent in Q1. Its target is to achieve 90% 4G population coverage, requiring 2.2 lakh broadband sites. However, meeting this target hinges on securing bank loans. While Vodafone Idea can reach 85–86% coverage without additional funding, hitting 90% will require bank support.
Management believes the government’s Rs 37,000 crore equity conversion has improved the tone of talks with banks. Speaking during the June 2 earnings call, Vodafone Idea CEO Akshaya Moondra confirmed that the company has reopened discussions with the government to resolve AGR dues following the Supreme Court’s rejection of its waiver request.
“I see no reason why the government should be constrained in any way to offer relief,” said Moondra.
VIL is having a comprehensive discussion with the government on resolving issues related to AGR dues and the shortfall in cash flow for repayment. The company has an EMI of Rs 16,000 crore toward AGR due in March 2026. The total AGR outstanding dues, as of FY25, stand at Rs 76,000 crore.
The telco is now looking to raise Rs 25,000 crore through debt, while a Rs 20,000 crore equity raise remains on the table as a routine board item. Although AGR clarity remains a sticking point for banks, it has not halted preliminary talks.
“Government action favouring the telecom industry, like equity conversion of AGR dues, was positive, but further action like deferral/waiver of AGR dues would be the key monitorable for Vodafone Idea,” Ambit Insights said.
The brokerage added that such relief would support Vodafone Idea’s efforts to raise debt and expand network coverage, which is critical to retaining its subscriber base. While metrics like churn and ARPU are also being tracked, government action will ultimately determine Vodafone Idea’s trajectory.
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