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DoT has started talks with banks to resolve financial stress in the telecom sector

The Department of Telecommunications (DoT) has started talks with banks to resolve financial stress in the telecom sector, particularly Vodafone Idea Ltd (VIL). The company is in urgent need of fund infusion in order to stay afloat.

The banks have been asked by the DoT officials to find solutions within the prudent guidelines, in a meeting held by the officials and bankers on the issue of Vodafone.

The finance ministry has asked public sector banks to curate and submit information related to their debt exposure to the telecom sector in general and VIL in particular.

The public and private lenders will have to incur a loss of Rs 1.8 lakh crore in case VIL collapses. A large part of the loans to the lender is in the form of guarantees of which the maximum share is held by the public sector banks. Yes Bank and IDFC First Bank are among the private sector banks that may see the most impact.

According to official data, VIL had an adjusted gross revenue (AGR) liability of Rs 58,254 crore out of which the company has paid Rs 7,854.37 crore and Rs 50,399.63 crore is outstanding.

VIL’s gross debt, excluding lease liabilities, stood at Rs 1,80,310 crore as of March 31, 2021.

The amount included deferred spectrum payment obligations of Rs 96,270 crore and debt from banks and financial institutions of Rs 23,080 crore apart from the AGR liability. The promoter Vodafone Plc and Aditya Birla Group have already said they are unable to pay such large liabilities.

Giving relief to Vodafone on one front, the government had proposed to withdraw all back tax demands on companies with the passage of ‘The Taxation Laws (Amendment) Bill, 2021’.