InvestorQ : Why is Vodafone expanding its borrowing limit now?
Anjana Aiyar made post

Why is Vodafone expanding its borrowing limit now?

Answer
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Khushi Patel answered.
4 weeks ago


The board of Vodafone Idea approved raising its borrowing limit as well as the issuance of debt paper to the tune of Rs.15,000 crore. Among other things, the AGM also discussed ways and means to pull the troubled telecom company out of the liquidity crunch.

The latest AGM has approved raising the borrowing limit of the company to Rs.100,000 crore to prepare a war chest to fight any price wars in the future as well as to expand its product offerings and to support its geographical expansion plans.

It may be recollected that earlier in September, Vodafone Idea had approved fund-raising plans of up to Rs.25,000 crore through equity and debt instruments. Funding becomes urgent after the Supreme Court has insisted that telecom companies must pay 10% of the outstanding dues by Mar-21, irrespective of amounts already paid.

While the company has a huge AGR bill of Rs.51,000 crore, its average revenue per user or ARPU has been on a consistent downslide. Vodafone will clear all its dues within the period of 10 years granted by the court.

In the case of Vodafone and Bharti, the problems started after the SC upheld government's stand on inclusion of revenues from non-core businesses also while in calculating the AGR of telecom companies. That has been the bone of contention all along.