During a recent earnings call, Vi’s CEO Akshaya Moondra said that as per the telco’s self-assessment, corrections are required in the principal component. The cash-strapped telco has also sought a waiver of the penalty component in the total AGR demand.
Analysts estimate that a near 50% cut in Vi’s AGR liability could reduce its upcoming annual payments by around Rs 6,500 crore after the current moratorium on regulatory payments (read: spectrum and AGR dues) ends in September 2025. This, they said, could ring in some cash flow relief, but still won’t be enough as Vi faces an initial Rs 27,000 crore payout in FY26, and thereafter, its annual payouts are estimated to jump to around Rs 41,500 crore from FY27 onwards to FY31.
Out of the original Rs 58,000 crore AGR demand slapped on Vi by the Department of Telecommunications (DoT) in October 2019, the principal component is 25% while the balance comprises interest, penalty and interest on penalty. Vi’s total AGR dues have mounted to Rs 70,320 crore in the quarter ended March 2024, as per company data.
“As per Vi’s assessment, the principal component (around Rs 14,000 crore) should be lower by Rs 6,000 crore. Applying the same 1:4 ratio between principal and total demand, Vi’s (total AGR) liability would be lower by Rs 24,000 crore at Rs 34,000 crore as of October 2019. Applying an 8% annual interest rate, this would have risen to Rs 46,200 crore as of end-FY24, but considering the Rs 7,800 crore payment made by Vi in 2020, its total AGR liability could come down to Rs 38,400 crore in the event of a relief in the curative petition filed in the Supreme Court,” IIFL Securities said in a research note seen by ET.
Last year, Vi and Bharti Airtel had reportedly requested the nation’s top court to hear in an open court their curative petitions against an earlier order that had dismissed pleas for rectification of what they called arithmetical errors in the DoT’s computation of their AGR dues. A curative petition is usually decided by the judges in the chamber unless a specific request for an open court hearing is allowed. Legal circles expect the matter to come up for hearing after the Supreme Court’s summer break ends in early-July.
“Vi’s management is hopeful of some relief from the Supreme Court on the AGR front, given their contention is on the calculation methodology and errors by DoT in calculating the AGR liability,” Nuvama Institutional Equities said.
Vi, on its part, is looking at further conversions of its government dues into equity in FY26 and FY27, especially of the instalments that are convertible as per the telecom reforms package. Such potential conversions along with internal accruals would be used to primarily meet upcoming government liabilities once the moratorium on regulatory payments ends next year.
Analysts at ICICI Securities said that on a like-for-like basis, Vi’s net debt has actually grown by Rs 4,250 crore in the quarter ended March largely due to interest cost, which is getting accrued to net debt as it now enjoys a moratorium on government dues. “Vi has reclassified its net debt for Q4FY24 by not including the interest accrued but not paid (component).”
The telecom joint venture between UK’s Vodafone Plc and India’s Aditya Birla Group (ABG), in fact, reported a lower net debt of Rs 2.07 lakh crore in the March quarter. Its quarterly net debt reduced by Rs 1,000 crore as vendor American Tower Corp (ATC) had converted its 14,400 optionally convertible debentures (OCDs) into 1.44 billion fully-paid equity shares during the quarter. ATC now owns 2.17% in Vi.
Having recently raised over Rs 20,000 crore via a follow-on-public offer (FPO) and capital infusion by one of its promoters (read: ABG), Vi is in discussions with a consortium of banks to borrow up to Rs 25,000 crore and additional non-fund-based facilities of Rs 10,000 crore.
Bulk of the targeted Rs 50,000-55,000 crore funding will be used as capex over the next three years to boost 4G coverage, 4G capacity and kick-start greenfield 5G rollouts in key markets.
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