AGR woes: Funds from Voda, Infratel-Indus merger may aid VIL's upfront payment, say analysts

New Delhi: The planned merger of Bharti Infratel and Indus Towers and additional payment from Vodafone Plc may help crisis-hit Vodafone Idea make part upfront deposit for securing staggered payment of balance AGR dues, if the apex court permits, analysts said.

Hearing the AGR case on Thursday, the Supreme Court had said private telecom companies including Bharti Airtel and Vodafone Idea must come out with a "reasonable payment plan" and make some payment to "show their bonafide".

"Bharti Airtel and Tata Tele have deposited 41 per cent and 25 per cent of DoT demand, and Vodafone Idea (VIL) has done only 12 per cent," ICICI Securities said in a note on Friday.

VIL can source funds from Vodafone Plc's unpaid indemnity of Rs 67 billion (or Rs 6,700 crore) and can receive Rs 36 billion (Rs 3,600 crore) for its Indus stake on merger between Bharti Infratel and Indus Towers, it said.

ICICI-Sec said it expects Vodafone Idea to deposit Rs 1,000-2,000 crore, which it believed given the company's balance sheet position could justify as 'reasonable' payment. VIL has consistently deposited its AGR dues in the past, which should also lend credibility.

"Bharti has already made a large payment of Rs 180 billion (41 per cent of Telecom Department demand) and Tata Tele Rs 42 billion (25 per cent of DOT demand) versus Rs 69 billion (11.8 per cent) by VIL. We don't foresee additional payment by Bharti or Tata Tele," it said.

Axis Capital, in a note, said Vodafone Idea may manage to survive if upfront payments are negligible and AGR outgo is spread over 20 years. A large upfront payment for statutory dues spread only over 10 years will be a stretch.

It observed that some upfront payment may be required to secure staggered payment of the remaining AGR dues.

"While Bharti Airtel is better placed to make AGR payments, VIL may also manage to survive if upfront payments are negligible and AGR payments are spread over 20 years...," it said.

Stating that making substantial payment upfront may be tough for the company, the note said some additional cash that it can arrange includes money received in April from Vodafone Group; tax refunds; some set-off against Rs 80 billion (Rs 8,000 crore) pending in GST refund; and cash from sale of its stake in Bharti Infratel post merger.

VIL's cash flow situation will be challenging post FY 2022, Credit Suisse said in its report.

The report further said that with VIL not having access to incremental debt funding, it would be difficult for the company to pay Rs 5,000 crore of incremental dues.

"On the other hand, having already paid 48 per cent of dues, incremental upfront payment will not be a problem for Bharti Airtel especially post the recent capital raise and declining leverage on back of improving profitability," it said.