This was the 11th consecutive quarterly loss for the telecom operator and it was higher than the December quarter’s Rs 4,589.10 crore loss but less than the year-ago period’s Rs 11,711 crore loss.
The streak of losses made the auditor of the telecom operator raise concerns over the telco’s ability to remain a ‘going concern’. Analysts have set price targets as low as Rs 5 on the stock, suggesting a potential 48 per cent plunge.
In its quarterly earnings, auditor SR & Associates said the company’s financial performance has impacted its ability to generate cash flow which it needs to settle or refinance its liabilities and guarantees as and when they fall due. This along with its financial condition has resulted in material uncertainty, casting significant doubts on the company’s ability to make the payments and continue as a ‘going concern.’
The company’s gross debt, excluding lease liabilities, stood at Rs 1,80,300 crore, comprising deferred spectrum payment obligations of Rs 96,270 crore and AGR liability of Rs 60,960 crore and debt from banks and financial institutions of Rs 23,080 crore.
The auditor said the assumption of a ‘going concern’ is essentially dependent on Vodafone Idea’s ability to raise additional funds, successful negotiation with lenders on continued support, refinancing of debt, monetisation of certain assets, clarity over the next installment amount, acceptance of its deferment request by DoT and cash flow generation from operations.
MD & CEO Ravinder Takkar said the company was actively in discussion with potential investors for fund raising.
But analysts are not impressed. They are worried over the company’s market share loss, under-investment and high leverage. They have a ‘sell’ rating on the stock.
Credit Suisse has maintained an ‘underperform’ rating on the stock with a price target of Rs 7.5. It said Ebitda for March quarter beat expectations, but it was a big miss on the revenue front. Leverage at the company stood at 21 times, which is unsustainable, it said and cited under-investments and market share loss as key negatives.
ICICIdirect sees the stock at Rs 5.
Analysts said certain lenders have asked the company for an increase in interest rates and additional margin money or security against existing facilities as a result of a rating downgrade. Vodafone has written to DoT for deferment of spectrum payment instalment of Rs 8,211 crore payable on April 9, 2022.
The company said it added 42 lakh 4G subscribers in the March quarter, taking the 4G subscriber base to 11.39 crore. It assured of cost optimisation with a target of Rs 4,000 crore in annualised opex savings by December 31, noting that it has already achieved 65 per cent of the targeted opex efficiency on a run-rate basis.
“Though VIL has seen a marginal improvement in 4G subscriber addition and lower total subscriber loss, it is too little to make any difference. We see liabilities coming up for payment soon, and VIL may have a cash flow mismatch. The efforts to raise funds has also not yielded any outcome yet. Relief from government on spectrum payment, and a reduction in AGR liability on SC accepting reconciliation are other hopes,” ICICI Securities said.
The brokerage has cut its Ebitda estimates by 11 per cent for FY22 and 14 per cent for FY23 and retained its price target at Rs 5.
Underinvestment is another concern.
Motilal Oswal Securities said Vodafone Idea’s capex spend rose to about Rs 1,540 crore from Rs 970 crore in the December quarter.
“Total capex spend in FY21 stood at Rs 4,150 crore against Bharti’s Rs 19,700 crore, which was 5 times higher. Unique towers for Vodafone Idea remained flat at 1,80,500 against 7,800 additions by Bharti to 2,07,000. Total broadband sites rose by 4,700 to 4,53,000. Bharti added 31,000 towers to 5,68,000,” the brokerage said.
The operator reported a 11.8 per cent QoQ fall in revenues at Rs 9,067 crore against Rs 10,894 crore reported for the December quarter. Average daily revenue, adjusted for IUC impact was flat QoQ.
