Vodafone Idea in talks with banks to refinance Rs 3-4k crore loans

This is expected to free up some cash for Vodafone Idea which needs to pay urgently to Indus Towers, Nokia and Ericsson

Vodafone Idea (Vi) has initiated talks with Indian banks like the State Bank of India (SBI), Punjab National Bank (PNB) and HDFC Bank to refinance loans of Rs 3,000-4,000 crore, the Economic Times (ET) reported quoting bankers aware of the development. 

This is expected to free up some cash for the telco, which needs to pay urgently to Indus Towers, Nokia and Ericsson. In September this year, Vi must pay Rs 9,600 crore worth of debt to different lenders. It owes Rs 7,000 crore to Indus Towers alone. As of September 2022, its total debt stands at Rs 2.2 trillion. 

"Vi is in fresh, preliminary talks with lenders seeking the rolling over of some bank debt, but they are yet to submit a formal refinancing proposal...discussions are also on for a softening of loan repayment terms," a senior banker told ET.

This comes just days after the Centre allowed the telco to convert its outstanding interest payment towards adjusted gross revenue (AGR) to equity. It would make Centre Vi's largest shareholder with a 33.44 per cent stake. 

Reports also stated that the company's owners, UK-based Vodafone and India's Aditya Birla Group, have committed to putting Rs 5,000 crore into the telco. This could encourage third parties to invest in the company, which needs cash urgently to compete with Reliance Jio and Bharti Airtel. 

Out of its total debt of Rs 2.2 trillion, Vi owes Rs 15,080 crore only to banks and lenders. 

It also needs money to upgrade the technology and move towards 5G. Around 51 per cent of its 231 million subscribers are currently on 4G; the bulk is on 2G or 3G. In contrast, 100 per cent of Jio's customers are on 4G. As for Bharti Airtel, which has stopped 3G services, it already has 61.8 per cent of its customers on 4G, Business Standard had earlier reported. 

VI's Average Revenue Per User (ARPU) is the lowest among its competitors at Rs 131, compared to Jio's Rs 177 and Bharti Airtel's Rs 190.