A slew of brokerages on Monday have sounded the warning gong over Vodafone Idea Limited (VIL) after the company reported a consolidated loss of Rs 7,319 crore in the first quarter of the current fiscal. ICICI Securities said it sees “high risk and huge concern for VIL” and that in the wake of growing uncertainties, it has put VIL’s estimates, rating and target price under-review until further clarity.
“We believe the existing operation is unlikely to meet upcoming payouts, and risk of default cannot be ruled out, the much anticipated tariff hike/s and capital infusion have been insufficient,” it said. VIL has upcoming payment commitments towards existing debt repayments, spectrum payment installment and annual AGR payments.
The results indicate that Vodafone Idea continues to face structural headwinds, BofA Securities said. “Unless the government steps in to aid, we see risks of India turning to be a two player market,” it said.
On the possibility of a revival package for VIL, finance minister Nirmala Sitharaman said, “Lots of officials are talking to each other... (but) nothing has come to me.”
She did not mention whether the talks were between government officials or the lenders were talking to Vodafone Idea.
“While the company had started showing signs of stability in previous quarters, especially on the 4G front, this was reversed during the quarter as a result of the impact of the second wave of Covid,” UBS said.
“We note that the company has large repayments due starting December 2021, and at the current EBITDA, we estimate Vodafone Idea could have a Rs 23,800 crore ($3.2 billion) cash shortfall until April 2022,” Goldman Sachs said,
Vodafone Idea CEO Ravinder Takkar on Monday said at the company’s earnings call that tariff hikes and floor pricing remain critical for the sector’s revival.
Takkar said although Kumar Mangalam Birla recently stepped down as chairman of Vodafone Idea, “he as well as Aditya Birla Group (ABG) and the Vodafone group are committing to providing support and guidance to the company, in line with the stated positions of both the groups”.
