Vodafone Idea will clear vendor dues using internal accruals over time and is not considering a “one-shot” clearance, a top executive said.
“We are very clear that the funding which we are raising is primarily meant for growth capex. It is not being raised to clear vendor dues. Vendor dues have to be cleared from internal accounts,” Akshaya Moondra, chief executive officer at Vodafone Idea, told Moneycontrol in an interview.
“Our bank debt is now down to less than Rs 4,500 crore. So, our bank debt servicing is less, and our cash generation is more. Every quarter, we should have a cash generation minus debt servicing surplus that we will be able to use to clear our vendor dues over time,” he added.
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Notably, Indus Towers expects Vodafone Idea to clear all its pending dues in one go. Still, it added that it remains committed to supporting all its customers in its growth plans and is best positioned to do the same for the country's third-ranked telco.
Indus Towers’ promoters include Vodafone Group Plc, one of the promoters of Vodafone Idea.
Moondra reiterated that the telco cannot use the funds to make any payments to promoter or promoter group companies, which would be the governing factor.
In its red herring prospectus, Vodafone Idea said it has negotiated extended credit periods with some vendors to fulfil its contractual obligations partially and was actively engaged in ongoing discussions with vendors to develop mutually agreeable payment plans to address outstanding dues.
In the prospectus, the telco stated that it had a ‘significant amount’ as outstanding dues payable to vendors. These payments were crucial since non-payments to tower vendors and equipment suppliers could adversely affect its business.
Indus collected Rs 300 crore from Vodafone Idea on account of outstanding past dues and 100 percent of the monthly collection in the quarter ended December 2023. In that quarter, it had an impact of Rs 2,270 crore due to provision for doubtful debts and Rs 493 crore from an exceptional item.
As per industry estimates, Vodafone Idea's dues to Indus Towers at about Rs 7,000 crore.
Vodafone Idea is also engaged with all 5G telecom gear vendors but said that order placement will depend on how early it secures funding for capex.
Of the total FPO proceeds, the telco proposes to use Rs 12,750 crore to purchase equipment for expanding its network infrastructure by setting up new 4G sites, expanding the capacity of existing 4G sites, and new 5G sites, as per the RHP.
The telco will spend Rs 5,720 crore of the Rs 12,750 crore earmarked for network expansion on setting up its 5G network.
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