British telecom major Vodafone Group plc on Tuesday estimated the group’s maximum exposure to Vodafone Idea at Rs 8,400 crore (euro 1 billion).

The company has estimated an outflow of euro 235 million (around Rs 1,923 crore) payable according to a contingent liability mechanism entered between Vodafone and Idea Cellular at the time of merger.

The group in its preliminary results said it suffered a loss of euro 0.5 billion for 2019-20 and said that the share of losses related to Vodafone Idea is mostly because of the adverse legal judgment on the adjusted gross revenue (AGR) payment.

“Having considered the payments made and refunds received by Vodafone Idea in relation to these matters, including those relating to the AGR case, and the significant uncertainties in relation to VIL’s ability to settle all liabilities relating to the AGR judgment, the group has assessed a cash outflow of euro 235 million under the agreement to be probable at this time and provided for this amount at 31 March 2020,” Vodafone PLC said in a statement.

“On April 22, 2020, the group announced that it had made an advance payment of $200 million to Vodafone Idea for amounts that are likely to be due in September 2020 under the terms of this mechanism,” the company said.

At the time of injecting the Rs 1,530 crore ($200 million) in April, the group had said the accelerated payment was to provide the Indian telecom operator with liquidity to manage its operations amidst the Covid-19 crisis.

The telecom service provider has paid Rs 6,854 crore so far against the government demand of Rs 58,254 crore.

Vodafone reiterated its concerns over the potential financial struggle for its Indian venture under the AGR crisis.

Vodafone CEO Nick Read on Tuesday said that the critical situation has been put under further financial strain by Covid-19.

“Significant uncertainties exist in relation to Vodafone Idea’s ability to generate the cash flow that it needs to settle, or refinance its liabilities and guarantees as they fall due, including those relating to the AGR judgement,” it said.

'The Vodafone Idea team continue to work constructively with all relevant authorities to find a path forward. Last month we accelerated a payment of USD 200 million to Vodafone Idea under the terms of a contingent liability mechanism within the original merger agreement,' he said.

'Vodafone Group's position remains unchanged. We will not inject new equity into our Indian joint ventures. We continue to work on the Indus Bharti Infratel merger which would provide cash proceeds for VIL at completion,' he said.