Vodafone Loses 2,700 Crore In Market Cap After Kumar Mangalam Birla Letter

1. VIL owes Rs 50,399.63 crore in AGR; it has already paid Rs 7,854.37 crore. After Tuesday's crash remaining dues are more than double the existing market cap of Rs 21,264 crore. Further, as of March 31, 2021, gross debt, excluding lease liabilities and AGR dues, is Rs 1,80,310 crore. This includes Rs 96,270 crore in deferred spectrum payment obligations and Rs 23,080 crore in debt to banks and financial institutions.

2. In his June letter Mr Birla had warned of a "looming crisis" and offered to transfer his 27.66% stake in the debt-laden telecom major to "any public sector/government/domestic financial entity, or any other the government may consider worthy, - to keep (VIL) going".

3. The Aditya Birla Group Chairman said VIL's financial condition had "sharply deteriorated" despite "every possible effort to improve operational efficiency" and that Rs 25,000 crore was required to "sustain VIL operations and pay regulatory/governmental dues".

4. "... without immediate support from the government... by July 2021... VIL's financial situation will (reach) an irretrievable point," he wrote in June, adding that his offer to transfer ownership was driven by a "sense of duty to the 270 million Indians connected by VIL".

5. Mr Birla said potential (non-Chinese) investors "want to see clear government intent to have a three-player telecom market... through positive actions on long-standing requests, such as clarity on AGR liability, adequate moratorium on spectrum payments and, most importantly, a floor pricing regime above the cost of service". Without this investors are displaying "understandable hesitation", he said.

6. There were no immediate comments from either VIL or any of the other concerned parties, including the government. It is also unclear if there was communication between the government and VIL following the submission of this letter.

7. Faced with a letter warning of "immediate" danger VIL stocks tanked on Tuesday, crashing 12 per cent to a 52-week low before recovering slightly. This on a day the Sensex and Nifty soared to record highs, buoyed by hopes of faster pace of economic recovery as various macro-economic indicators pointed towards demand revival in the economy.

8. Last month the Supreme Court dismissed applications filed by the telecom majors, including VIL, in January, seeking recalculation of AGR citing "mathematical errors" in calculation of the AGR dues. In September last year the court said the dues could be paid over a 10-year period but added that 10 per cent had to be paid by March 2021.

9. Telecom majors Vodafone, Bharti Airtel and Reliance Jio have been locked in two-decade old revenue-sharing dispute with the government that centres on AGR, or adjusted gross revenue. The government wants revenue from non-core businesses to be included in license fees, but the companies say such revenue should be excluded.

10. In December 2019, Mr Birla had warned that Vodafone would be forced to shut down if the government did not provide relief on AGR and other liabilities. "If we we are not getting anything I think it is end of story for Vodafone Idea," he had said.

​With input from PTI