Kumar Mangalam Birla, chairman of Aditya Birla Group. (Photographer: Dhiraj Singh/Bloomberg)
Kumar Mangalam Birla, chairman of Aditya Birla Group. (Photographer: Dhiraj Singh/Bloomberg)

Birla Offers To Give Up Vodafone Idea Stake Amid Worsening Financials

Ahead of the Supreme Court's latest judgment on adjusted gross revenue dues for telecom companies, Kumar Mangalam Birla, chairman, Aditya Birla Group wrote to the government seeking immediate support for Vodafone Idea Ltd.

In the June 7 letter addressed to Cabinet Secretary Rajiv Gauba, Birla said that VIL had been trying to raise Rs 25,000 crore from potential foreign investors in a bid to sustain the company's operations and pay regulatory and statutory dues. BloombergQuint has reviewed a copy of the letter.

However, the potential foreign investors had first sought clarity on issues such as the AGR dues, the moratorium on spectrum dues and a floor pricing regime for the telecom industry.

"In the absence of definitive steps in this regard, the potential investors have understandable hesitation to invest," Birla said in his letter.

He further said that if the government does not provide adequate support to VIL soon, the company could be staring at a financial collapse.

I want to emphasize that without immediate active support from the government on these three issues (certainly by July '21), VIL's financial situation will drive its operations to an irretrievable point of collapse.
Kumar Mangalam Birla, Chairman, Aditya Birla Group (Letter To Government)

Birla said that he would be happy to work with the government to urgently explore all possible options and solutions to strengthen VIL's operations without any consideration of private interest. Aditya Birla Group owns 27.66% stake in Vodafone Idea.

The Economic Times, on July 30 had reported that ABG was unlikely to increase its stake in VIL in a bid to save the company.

I am more than willing to hand over my stake in the company to any entity - public sector/government/domestic financial entity or any other that the government may consider worthy of keeping the company as a going concern.
Kumar Mangalam Birla, Chairman, Aditya Birla Group (Letter To Government)

Queries mailed to Aditya Birla Group and Vodafone Idea on Monday were not responded to immediately.

Also Read: Nationalising Vodafone Idea May Be India's Only Option

While the telecom company has faced severe financial stress, it has not defaulted on any lender dues, a senior official at State Bank of India said, speaking on conditions of anonymity.

A recent report by ICICI Securities had said that Vodafone Idea had liabilities worth Rs 23,200 crore coming up for repayments within the next 12 months. In comparison, the company's liquid assets include Rs 350 crore cash and cash equivalents, and land and tax refunds worth Rs 3,000 crore.

The company suffered a net loss for the eleventh straight quarter in the three months ended March. Its net loss widened to Rs 7,023 crore in the January-March period from Rs 4,532 crore in the three months ended December.

Previously, VIL, Tata Teleservices Ltd and Bharti Airtel Ltd have challenged the Department of Telecom's math on the dues at the Supreme Court. On July 23, the apex judiciary had dismissed appeals by the telecom companies, stating that no further recalculation of dues would be permitted.

Before the Supreme Court judgement, on July 19, Solicitor General Tushar Mehta informed the court that he does not have any instructions from the government on the issue and that he would need two days to revert.

In October 2019, the Supreme Court had ruled that non-core revenue must be included while calculating statutory levies, ending a 14-year-old legal battle between mobile operators and the government on the definition of AGR. That had increased the liabilities of Bharti Airtel and Vodafone Idea to more than Rs 90,000 crore.

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